China’s economy is slowing. But is it still growing? China says yes, with an official growth rate of 6.9 percent in 2015 and a target of at least 6.5 percent for 2016. A CNN poll of industry economists yielded a consensus of 6.5 percent for 2016 as well, and the IMF is clinging to 6.3 percent. But many skeptics aren’t so sure. Barclays won’t go higher than six percent, Citi says five percent, and the ever-bearish Conference Board anticipates growth of only 3.7 percent in 2016, which is equal to its lowball estimate for 2015.
Indicators of real economic activity in China suggest that even 3.7 percent may be optimistic. Electricity, steel, and coal consumption all declined in 2015. Admittedly, there are special circumstances for each case. Electricity demand fluctuates depending on the weather. Steel is mostly used in construction, which is slumping as new apartments go unsold. Coal is used to generate electricity and to make steel. And as China navigates the transition from a manufacturing economy to a service economy, it needs less “stuff” to generate the same amount of economic activity.
But there are more bad numbers. The total tonnage of freight shipped by rail within the country fell by 4.7 percent in 2014 and 10.5 percent in 2015. December 2015 saw a 15 percent decline in tonnage from December 2014, a year-on-year decrease that has held steady for several months running. China’s exports likewise fell by 2.8 percent between 2014 and 2015. The purchasing managers’ index (PMI) has been stuck below 50 for ten straight months, indicating a long-term contraction in manufacturing activity. Meanwhile, the stock markets and currency exchanges have been in turmoil since the middle of 2015.
The only bright spot in China’s economy seems to be the Internet, but at 2.5 percent of the total economy, the online sector simply isn’t big enough to save the whole economy. Besides, online sales do little more than cannibalize local retail sales. Total (online and offline) retail sales growth in 2015 was a moderate 10.7 percent. Compare that with 18 percent in 2010. And a very good argument can be
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