The Chinese are slipping towards what might be called a recession despite the fact the economy is growing at a 7.4% pace. Anywhere else in the world these numbers would be hailed as a major accomplishment but for China this is close to disastrous. The ability of the country to keep pace with the demands of a billion and half people relies on fast growth and that is not something they can count on right now. One of the issues at the moment is that China may not be accurately measuring its economy given the size of the informal sector. China has always had a lot of people working “off the books” but the size of the grey economy has become a major factor of late and could be skewing the data.
Analysis: China is trying to establish a consumer based economy and that means changing the basics of the system. A nation that competes by having a low wage environment can’t develop a strong consumer base overnight.
Courtesy Dr. Chris Kuehl, Armada Corporate Intelligence