Chinese economic growth, as it has done for last five quarters, yet again managed to come in around expectations for the December quarter of 2015.
At 6.8%, the year-on-year growth rate was right on expectations. The annual growth rate, at 6.9%, was also close to the 7% level targeted by the government.
Its stability, and accuracy, would put Swiss watchmakers to shame.
While to many the unerring accuracy points to the data being flimsy – a case of the government simply starting with the final GDP figure and working back – the internals of the report suggest that China’s new growth engine – services and consumption – continued to perform strongly, managing to offset a slowdown in heavy industry, investment and trade, the areas that once powered China’s economy.
According to the NBS, the nation’s tertiary industry – largely encompassing services – accounted for 50.5% of GDP in 2015, an acceleration of 2.4 percentage points on a year earlier and some 10.0 percentage points above secondary industries, the sector that up until recently was the largest component of China’s economy.
This means the services-heavy tertiary sector is now more than half of the economy.
There was also strong data on the other great hope for China’s economic rebalancing – consumption.
Over the year total retail sales of consumer goods hit 30,093.1 billion yuan according to the government, a nominal annual increase of 10.7%. After adjusting for price movements, that equates to an annual growth rate of 10.6%.
Sales in urban areas surged by 10.5%, outpaced by an even faster acceleration in rural areas of 11.7%.
Demonstrating the growing clout of online consumers, the NBS reported that online retail sales grew to 3,877.3 billion yuan, an increase of 33.3% on 2014. Sales of non-physical goods – essentially service – grew even faster, jumping by 42.4%.
These are mammoth changes in anyone’s language, and ones that are likely to prove highly-lucrative to firms that manage to crack the market.
Helping to drive the uplift in consumer spending was continued growth in household incomes.
The NBS noted that the national per capita disposable income of residents was 21,966 yuan in 2015, representing nominal growth of 8.9% or a real increase of 7.4% after factoring price movements.
In real terms, per capita disposable incomes of urban households grew by 6.6% to 31,195 yuan, outpaced by rural residents whose disposable incomes grew by 7.5% to 11,422 yuan.
As evidence of the growing size of China’s middle class, the median national disposal income was 19,281 yuan, up 9.7% year-on-year in nominal terms.
Although tiny in comparison to those in advanced economies – an average disposable income of US$3,340 wouldn’t get you far in a city such as London, New York, Tokyo or Sydney – the growth seen last year, following similar increases in recent years, will see consumption balloon even further should the economy continue to evolve as policymakers currently predict.
However, that opportunity is also perceived to be a threat among many in financial markets. A threat that with China’s industrial and investment sectors already weakening, an unexpected economic mishap, derailing activity in the services sector, could lead to a so-called “hard landing” for the Chinese economy in the years ahead.
While markets continue to grapple with than conundrum – something that looks certain to persist for many years to come – on the backward-looking data received today, China’s economic rebalancing looks solid, at the very least, for now.