Everyone should be happy with such a result which contrasts with the doubts affecting the durability of U.S. growth, the feeble rebound in Europe and the secular stagnation in Japan. But it’s not the case. This 6.9% figure is immediately accompanied with the following comment: “the worst achievement in 25 years”. China GDP has reached, in 2015, a level near 11 000 billions dollars. Year on year, production has risen by almost 700 billions dollars, roughly a third of French GDP, whose increase, last year, was as little as 20 billions dollars. But any news coming from China is accompanied with a negative judgment. And it is not new. Very few people had understood the sense of the reforms initiated by Deng Xiaoping and looked at the country to sale their products or to invest there.
The popular theory, at that time, was: “it is not going to last…”.Something like a passenger who has missed his train (like Alstom…) and who explains that it is not serious because the train is going to derail… French intelligentsia, from Alain Peyrefitte to Le Monde newspaper, had a love affair with Mao and Cultural Revolution. It still doesn’t forgive China today to have successfully broken with this experience and to have, by itself, regained its great power status a century of civil wars and neo colonialism interventions by occidental powers had injured. We must abandon this biased and unnecessarily pessimistic vision of Chinese reality, which has impacted French enterprises strategy. Today, they have a much smaller presence than their German, American and Japanese competitors, which is, for the last ones, a height when we know the historical context of the relationship between these countries.
Some figures are sufficient to take us back to reality. In 2005, China growth reached 11.3% but the increase of the value of the production represented 300billions dollars, twice and half less than last year increase. It is the increase of the production in real terms which is important since it reflects the evolution of the Chinese market and business opportunities. And if we measure it in purchasing power parities to make international comparisons more relevant, we notice that China GDP is now close to the United States. Here is the reality and it is the point we have to take into consideration.
China is not anymore an emerging country, since it has successfully taken off. Its growth model is changing as any other countries which, in the past, reached a certain level of development. Three changes are foreseeable. First, the nominal and progressive reduction of the growth rate since this ratio will apply itself to a more and more important basis. It is already the case but the ratio will have in the future to be compared with developed countries figures and not with past Chinese ones. Second, the transformation of the growth model will lead to a reduction of the share of the industry and a growing role of services. They already represented 50.5% of the GDP in 2015 against an average of 46% during the last decade. This reveals the current transformation of the consumption model: Chinese young people are adopting a way of life closer to the occidental one with, for example, a growing interest for travel. That reveals a strong appetite to discover the world, coming from people who have been isolated during such a long period. This trend is irreversible and will be strengthened, on the long term, by the abandon of the one-child policy. Here are some opportunities facing the French companies.
The third current change is related to international economic relations. China is progressively abandoning its profile of a low cost subcontractor for multinationals. The “New Silk Road” project as a reference of the forerunner role of China in globalization, must not to be underestimated. Its purpose is to support its partners which, for most of them, are its neighbors, toward a growth model based on mutually profitable exchanges made easier with the construction of transport infrastructures. As and when these countries take off, as China did thirty years ago, everybody wins, first of them the kingdom which will become again the Middle Kingdom.
Here are the guidelines of China new economic strategy. It is not an easy trip and it will certainly encounter a cyclical dimension with all the bumps it involves, notably regarding some industrial activities, and a more important sensitivity to the world economic situation. But the hypothesis, by far the most likely, is that this country, which in a single generation succeeded to reach the level of a great economic power, will know to proceed to the necessary adaptations to consolidate its new status. This will affect its currency. Its international role will increase and it has passed through the first steps with the inclusion of the Yuan in the IMF basket currencies whose status reform have just been ratified by the Congress of the United States.
Previous months turbulences are part of the process and the reactions generated have been excessive. Yuan fall against dollar has not surpassed 5%. Its purpose was to offset the consequences of the American currency reevaluation against the other currencies, including the euro. It is rather modest, especially when we remind the violent fluctuations which had affected the dollar at the beginning of the eighties or the moves of the Yen or the successive crisis which occurred in Europe before the creation of the euro.
The role, taken by China in the world economy is irreversible. Instead of questioning it, it would be much better in France, to think about the best way to adapt our business community to this new situation. To export more or to settle partnerships with Chinese companies could certainly permit us to accelerate our own growth. We need it a lot. Don’t miss, once more, the train.