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The ‘New Normal’ in China’s economic growth

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Economists are now using a new term for China’s economic growth. The ‘new normal’ is a growth rate of around 7.4% down from the highs of around 10%. This is the weakest in 24 years. ‘The fast growth in China’s economy is over’, says Robert Wang. ‘This more moderate growth rate is what the government wishes and prescribes’.

According to China Wool Textile Association and based on 2014 total top imports was 10995 tonnes, an increase of 9.5%, exports was 48276 tonnes increased by 9.2%. Notwithstanding the slower growth Mr Wang believes China will continue to be a dominant force in world top making.

 

Presenters at the recent IWTO Congress held in Zhangjiagang China this new normal is a positive development for China. The China government is determined to position China as a middle to high quality manufacturing base, moving away from the concept of cheap cheap cheap.

 

This shift is a result of government acknowledgement that to continue to grow, the middle class will need a major increase in wages, and that this will only happen if manufacturing will move to better quality production. The increase in the middle class is fundamental to centre government policy to create a domestic market and to make the Chinese consumer spend more.

 

‘Top makers in China are telling us that orders from outside China have been increasing over the last 18 months. There will be consolidation within the top making industry in China’. Mr Wang believes the big companies will become bigger and the small operators will gradually exit the industry. This is due’, he says ‘mostly to government enforcement of very strict environmental guidelines and small operators simply have no capital to upgrade and will eventually be forced out.’ He also points out that in terms of government regulation in pollution control and other environmental requirements such strict enforcement are the toughest in the world, even tougher than in Europe.

 

The anti-corruption campaign has also impacted on top makers in China that have relied heavily on the corporate, army and government uniform business. As the Chinese government tries to save money in all areas the pace in orders has slowed. This has had a major impact – particularly in the worsted sector – super fine wool prices have suffered badly.

 

So to maintain growth above 7.5% will not be an easy task as Chinese industry. In response China’s central bank has cut interest rates for the second time this year. It lowered its benchmark rate by 25 basis points to 5.1%, saying the move was aimed at boosting development. The cut is the third in six months. It follows other measures designed to spur growth in China, including tax cuts. China’s slowdown is expected to continue for some years. Last week, the International Monetary Fund (IMF) predicted China’s growth would stabilise at about 6% by 2017.

 

Also this week, China’s government cut duties on many imported goods including textile garments to encourage Chinese to buy locally.

 

 

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