Results of the Chinese Economy in 2018. The Outlook for 2019.

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Results of the Chinese Economy in 2018. The Outlook for 2019.

In any economic analysis, one can not conclude a given result only from absolute terms. The world is immensely globalized and interconnected among nations.
In 2018 a very conflictive economic environment occurred in several essential points of the planet. Trade wars, internal political problems of critical countries, etc. These were issues that significantly impacted the outcome of the world economy.
In this context, I consider it optimum the result of the growth of 6.6% of China’s GDP in line with the government’s target of 6.5% pa.
If we look at the composition of this growth, we can see some interesting factors.
First, the small decline in China’s industrial output from 6.6% from 2018 to 6.2% in relation to 2017 showed that despite the tremendous global industrial transformation, as a result of the insertion of the “Fourth industrial revolution”, the Chinese government knew counterbalance the effects of the production of traditional industries of low competitiveness with the modern sectors of high competitiveness. This process of operational change and adjustment is long and complicated. It should also occur over the next few years.
The investments of induction and implantation of the modernization of the factories require a time of maturation to generate better results. Moreover, this will be fundamental, because we are facing a great revolution in consumer demand for better quality and lower prices for products and services. For this, it will be fundamental to reduce costs and increase the productivity of companies.
Second, in spite of the already mentioned economic crisis of commercial wars, the unemployment rate in China remained stable. The number of new jobs in urban areas reached 13.61 million in 2018, surpassing the government’s annual target.
Third, there was an increase in retail sales, mainly reflecting a 9% domestic consumption in China. A number for today’s hugely significant. This sector together with the provision of services will play a key role in shaping the future results of China’s economy in the coming years.

What to expect for the year 2019?
To contain this transformation and global economic turbulence, probably China, among other things, to use tax reduction measures and better credit conditions for small businesses.
Chinese economic officials are probably trying to change the profile of growth by encouraging domestic consumption to be less hostage to external economic movements.
However, this would be equivalent to investing more in private and technology-intensive smaller companies. Consequently, there would be a need to impose greater adjustments on state-owned enterprises. The point is that this is not a natural but inevitable problem. However, it is difficult to estimate how long it will take to occur.
Of course, as government resources are better allocated, their indebtedness would tend to shrink, and the economy would be freer to grow.

By | 2019-01-21T15:29:47+00:00 janeiro 21st, 2019|Quick News Brazil, Quick News China|0 Comments