CEIC China Data Talk: New Normal vs Old Normal

CEIC China Data Talk - June 16, 2015 “New Normal” refers to single-digit growth whereas “Old Normal” is double-digit growth. So, what does the gap between 10% and 7% growth imply in the China economy? It means that China is undergoing a state of economic slowdown or it is merely an economic transition? During this transformation period, what has happened to China’s economic activities and what kind of preparation has been made to cope with the new era of “New Normal”? An overview of the economic activities over the past few years revealed that, whenever any economic issues arose, Chinese authorities would launch large-scale investment projects to stimulate the economy so as to maintain its robust growth. However, injecting such massive investments into the economy have created imbalances in the industrial structure. Is the “New Normal” nowadays on the right track of the economic development? In fact, with the structural imbalances in the economy, the large-scale investment projects has been no longer the effective drivers of sustainable economic growth in recent years as shown in the diminishing marginal returns of investment in the graph above. Under the current economic transformation, the most influential experience in people’s everyday life is probably the internet economy such as “Internet-Plus” and “O2O”. However, can this new dimension of life be interpreted as economic transformation or industrial structure reform? Or, rather, it acts only as the catalyst for expanding economic activities given the convenience it adds to the transaction of goods and services. It will probably take time to get answers for the questions like “Is the industrial structure being optimized?” or “Is resources allocation being appropriately done to yield economic efficiency?” Yet, have these frequent and convenient transactions led to more unnecessary consumptions and wastage? Will they create even bigger hidden problems to the China economic system which is composed of a huge population spreading across vast regions? These impacts are certainly worth our deeper consideration and tighter surveillance. Otherwise, with the focus on boosting the consumption only, the economy will end up with more and more wastage. Hence, it will make it very difficult for China to improve its industrial structure, which in turn, creates hurdles to enhance the quality of its overall economic activities. By the China Database Team Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
16th June 2015 CEIC China Data Talk: New Normal vs Old Normal

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