Letters from editors

This is what I received from Simon Baptist of EIU today via email:

When I talk to business people about China, especially in Asia, there is a lot of scepticism about the growth numbers. Everyone’s individual experience seems to be that things are certainly not growing to the same extent as the 6.9% that the EIU is forecasting for GDP growth in 2015. We have been looking into this issue, and our conclusion is that the slowest growing sectors of China’s economy—like heavy industry and export manufacturing—are among the ones that foreign investors are most exposed to. Industrial sector value-added in July was only 6% higher than the previous year, while electricity consumption—taken by many as a barometer of the health of the economy—was up by only 1.3% in the first half of 2015. So where, then, is the growth that gets us up to this 6.9%?

The answer lies in the services sector. Even more so than is usual, data on the services sector is patchier in China than for manufacturing and heavy industry. Nonetheless, growth in many service sectors has been strong, with financial services, hospitality, transport, telecoms and e-commerce all growing above the national average rate. That’s not to say that there are no problems—the financial sector, in particular, is at risk of a slowdown in the latter parts of 2015, owing to market turmoil and questionable government intervention—but it is part of the transition of China’s economy that we have been watching for the last decade and will continue to watch for at least the next one too.

This is what I received from Jamil Anderlini, FT Bureau Chief in Beijing:

China has been roiling global markets all summer as its authoritarian leaders try to stop a huge stock bubble from bursting and its slowing economy from stalling. But the equity market collapse accelerated after Beijing opted in early August to devalue its currency for the first time in more than two decades and now the government faces growing questions over its policy-making competence.

With a debt load bigger than the US or Germany, an economy overly dependent on credit-fueled property development and capital flight accelerating, what will China’s Mandarins do next to avoid what many believe is a gathering economic crisis?

You can follow the latest on China’s Slowdown in our in-depth section.

Jamil Anderlini

Financial Times Beijing Bureau Chief

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