china's economy

2013 to now

• China’s economy grew by 7.7% in 2013
• Manufacturing fell for the fourth month in a row

China's three forms of growth

• Supply
• Demand
• Credit

supply

Diminishing economic power?

• Recent teports show supply-side limits are tightening
• Urban workforce is growing more slowly
• Working age population shrank by 2.44m in 2013

demand

losing steam

• GDP surpassed government’s minimum threshold of 7.5%
• Consumer prices rose by only 2.5% in 2013
• Prices paid to consumers are steadily dropping

credit

credit imbalance

• Financing grew 20%
• Nominal GDP grew by only 9.5%

1. fruitful spending

• Capital increases production capacity
• Adds to both demand and supply
• Results in higher economic growth

2. wasteful spending

• Wasteful consumption or misconceived projects
• Credit results in higher inflation
• Increases nominal GDP, not real GDP

3. speculative spending

• Invest in existing assets
• Not included in GDP
• Credit, asset prices rise; consumer prices remain flat

Untitled Slide

not all bad

• Rebalancing of incomes and production
• Migrant workers, rural households saw incomes grow

2014 and beyond

• Shift in production
• Services surpassed industry
• Will this prove the optimists right in 2014?