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China’s rapidly growing economy has been driven by its exports. However, for growth to continue in the long run, many have pointed to the need to shift toward more of a consumer-driven economy.In his latest Viewpoint note, Jim O’Neill, Chairman of Goldman Sachs Asset Management, notes that the latest reads on the Chinese economy provide more evidence that this shift is indeed occuring:
And beyond just this, it seems more and more evident that the balance of growth is shifting. We don’t have any details yet, but given that the trade surplus ended 2011 at only just over 2 pct of GDP, it seems clear that net trade negatively contributed more and more as the year progresses. Consumption, therefore, must have started to rise as a share of GDP. And certainly my travel anecdotes would suggest so. The China Daily, European Weekly edition, had a fascinating article the week of Jan 20-26th in which two authors linked to the all important NDRC – National Development and Reform Commission – wrote about the “hurdles ahead.” In this piece, when discussing the trade balance, they suggest import growth was 4.6 pct higher than export growth last year. They also wrote that “general trade” grew by 29.2 pct compared to “processing trade” which grew by 12.7 pct, which is suggestive of an economy changing its balance. And in case you don’t realise how strong trade between the BRICs and/or Growth Markets is becoming, their bilateral trade last year grew by 23.9 pct, 34.5 pct, 42.7 pct and a whopping 76.7 pct with each of ASEAN, Brazil, Russia and South Africa. Not bad for a country whose trade surplus overall is declining.