China’s economy grew 6.9 per cent last year, according to official figures released on Tuesday, the slowest pace since 1990.
Growth in the Asian powerhouse has fallen markedly in recent years, with real gross domestic product expanding at less than half the pace of 2007. The ruling Communist party projects an average annual growth rate of 6.5 per cent over the next five years, in contrast to an average of more than 10 per cent in the first decade of the century.
But while the global investment community tends to focus on the headline growth number, it is easy to forget that because China’s economy is so much bigger after its tremendous growth spurt, in terms of absolute growth it is still contributing more to the global economy than it did a decade ago.
The first chart plots the dramatic decline in China’s headline growth number, from a peak of 14.2 per cent in 2007 to 7.3 per cent in 2014, against the annual nominal increase in the size of the country’s economy.
On the eve of the global financial crisis in 2007, the annual increase in China’s nominal GDP was $793.3bn. In 2014 it was even bigger, at $864.2bn, despite the marked deceleration in economic growth.
Another way to appreciate the sheer size of the Chinese economy — and just how much bigger it continues to get every year — is to compare the annual nominal increase with the sizes of other national economies.
As shown by the chart below, if China’s increase in nominal output in 2007 was ranked as a country in its own right, it would have qualified for a seat at the G20, just ahead of Turkey (the 17th-largest economy at the time).
In the wake of the crisis, the Chinese government unleashed a Rmb4tn stimulus that acted as a huge catalyst for its economy — spurring real growth from 9.2 per cent in 2009 to 10.6 per cent in 2010 — as well as global demand.
Despite the marked slowdown since then — as the leadership team headed by President Xi Jinping and Premier Li Keqiang embraced a “new normal” of slower, more sustainable and more environmentally friendly growth — China continues to contribute the equivalent of a large developing country to the global economy each year.
When China’s output grew “only” at 7.3 per cent in 2014, its slowest rate of growth in almost a quarter century, the absolute increase in nominal output was again bigger than Turkey’s entire economy.