China’s Economy in Transformation China at the Crossroads: Temporary Slump or New Age for Asia's Powerhouse?
As China’s economy is slowing down and the stock markets are undergoing turbulences, trade journalists, economists and industry experts alike wonder whether this is just a temporary slump or the beginning of a “new normal” for the Chinese economy.
A growth rate of 6.9 % in 2015 — in many countries around the world this would be considered a tremendous success. But in China with its history of double digit growth, the significant slowdown causes some wrinkled brows. To be sure — the economy is still growing, and still growing much faster than in most other regions of the worlds. And in absolute figures, the annual increase of China’s BIP still surpasses the total BIP of countries such as Switzerland or the Netherlands.
Nevertheless, it has become obvious not only to economists that China is facing challenges that run deeper than just changes in trade statistics. Air pollution levels this winter have reached unprecedented heights, causing the government to raise alerts and restrict traffic and industrial production.
The explosions in Tianjin in August 2015 stimulated questions about safety precautions in logistics and production. And in the “Guardian”, columnist Will Hutton describes China’s economy as one big Ponzi scheme “that is waiting to implode”.
Better stay away from China then? Quite the contrary, according to leading stakeholders. For example, Sanjeev Gandhi, Head of BASF’s operations in Greater China and Asia Pacific, explained in a recent interview with China Daily that the segment of innovation would open up new opportunities for global companies and expressed that BASF was “very, very confident about the China market”.
The focus on innovation and on technologies that go beyond mass production is in line with several actions that China’s government has set in motion even before the recent economic turmoil.
'Workbench of the World' is a Thing of the Past
One is the transformation from China as the “workbench” of the world towards a center of innovation, as expressed in the “Made in China 2025” strategy. This ten-year action plan that was issued by the State Council in May 2015 aims to transform China in a leading manufacturing power by the year 2019. The focus is clearly on innovation and the combination of manufacturing and services. A great emphasis is placed on digitalization, mirroring Germany’s “Industrie 4.0” initiative.
“Countries, both developed and developing, are reshaping their competitiveness as new technologies, including 3D printing, mobile Internet, cloud computing and new energy, emerge and China needs to urgently improve its ability to innovate and grasp these cutting-edge technologies, the plan states”, according to the official news published on the State Council’s website.