Despite this however, China is still growing at an incredible rate which other countries would dream of. The release of this data coincides with the Chinese President Xi Jinping visiting the UK for a week. There is no doubt that talks of a new trade deal will be in discussion. With China growing at this rate, it would mean global economic growth of 1%, making China the biggest contributor to the world economy. So it is easy to see why Britain wants to increase trade with China and increase Chinese investment.
However, it is an inescapable fact that some countries, including the UK, have been affected by the slowdown. The country’s slowdown has led to an undermining of industries such as energy and metals, which ultimately led to many of the UK’s steel-making factories such as the SSI plant in Redcar cutting jobs and even shutting down completely. The blame was put on cheaper Chinese steel sales and falling steel prices, leaving many industrial centres in developed countries to further deteriorate and unable to compete with foreign competition.
As well as this, many Chinese factory workers are on strike and figures are on the rise. In 2014, there were over 1300 strikes in 2014 but this year that figure has now exceeded 1800. This is partly due to unpaid overtime, with some factories moving to Thailand for cheaper labour. This is not very good for an economy attempting to move from an export-led economy to a consumer and services-led one. Even if factories were not on strike, many Chinese people save their almost 1/3 of their income so persuading consumers to spend more into the Chinese economy will not be an easy task.
In terms of what will happen in the future, economists are expecting a cut in interest rates as well as reducing bank reserves by the end of the year. However, Chinese leaders are still hoping for an annual growth target of 7% and have increased pressure on local officials who they feel have not been spending their budgets fully and fast-tracking infrastructure projects, all of which have previously helped China to grow dramatically over the past decade.
So should we be worried about the declining growth rate? There are many sides to this argument with many British manufacturing bases slowly dying out due to cheap labour and materials that China can easily and efficiently offer. However, this doesn’t necessarily mean that Britain will completely lose out. Many industries such as the British car industry are benefiting from Chinese markets. With the current slowdown, President Jinping will be keen on increasing trade with other countries to keep at the target of 7% per annum, which could see more British companies selling to China. However, the lower growth rate is also bad for China’s workers, as seen by the multiple strikes. Therefore, Chinese leaders will want to improve this figure and make the growth target seem achievable.
Contributed by Mathew Chandy – Economics Editor