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January 21, 2013 at 05:40 AM
China spent a good part of 2012 battling an economic slowdown and accusations of political corruption, as well as preparing for the handover of power that comes once every ten years. But toward the end of the year, and after seven straight quarters of slowing, the Chinese economy once again began to heat up. A boost in its factory purchasing managers’ index (PMI), more consumer action, and an increase in the services sector teamed up to bring optimism in their wake.
Whether the upswing is a trend or not, in his final New Year’s Eve speech as president of China, Hu Jintao—who will hand over the reins to his successor Xi Jinping in March—said the country would work to boost economic growth globally in the year to come. He gave no specifics on just howChinawould do that, but said it would “step up efforts to promote strong, sustainable and balanced growth in the world economy.” He also said the country would work on keeping growth in 2013 stable while also restructuring its growth model, and that its long-term goal for both Macau and Hong Kong was continued prosperity.
One way its growth model could change is through its increase in domestic consumer spending. The appetite of Chinese customers for everything from luxuries and cars to furniture and appliances fueled the fourth-quarter recovery ofChina’s economy, with manufacturing, real estate and mining contributing a smaller share; the latter three have suffered during those seven quarters of slower growth but may be clawing their way back. Retail sales were up 14.9% YOY in November. Retailers’ morale is up, too, with 72%, according to the China Beige Book survey, expecting higher sales in six months.
China’s service sector has shown the fastest growth in four months for December. In 2011 services provided some 36% of new jobs in the country, for the first time outpacing agriculture as a driver of employment. Services are also on the upswing because of the population shift from rural areas to cities, with urbanites relying more heavily on the sector.
Xia Nong, deputy director-general of the Department of Industry under the National Development and Reform Commission, was quoted in China Daily saying, “Expanding domestic demand will be a major stimulus for China’s economic growth, and the greatest potential will come from the service sector.” He also said that he would encourage not just expansion of Chinese service firms internationally, but also woo foreign competition to operate in China. Outside investors are already taking advantage of the boom in services; the China Daily cited Ministry of Commerce figures of $47.57 billion invested in the sector by foreign firms in the first 11 months of 2012 alone.
Construction services were among those driving the increase, and that falls in with rising land prices. Signs point to a real estate recovery; that could drive ripple-effect recoveries in some 40 other industries that depend on the health of the real estate market for their own well-being. Still, the government has said it isn’t ready to let up on tight credit and purchasing restrictions that were designed to cool down a market once thought too hot for its own good.
