Effortlessly finding itself in the second spot as far as world economies are concerned, Chinas economy clocked up to $5 trillion this year. The way to the top spot is a long way ahead still as the US economy is worth $15 trillion.
Chinas export-led growth model has become folklore for anyone following the global economy. Since it embraced market reforms in 1978, the middle kingdom has averaged an annual growth rate of nearly 9.5 percent.
But there are significant risks to growth expectations. A sagging demand from western consumers, changing domestic demographic trends and unequal distribution of wealth pose threats to continued growth.
Lower wages compared to its western trading partners have long been Chinas comparative advantage over the last three decades. Now, with much of the able-bodied labour force already in the cities, wages have started to rise.
Just last year, wages in the least-paying jobs at factories saw increases of nearly 18 percent. And owing to the one-child policy, demographics are shifting and growth in the labour force is slowing from its consistent 1.8 percent rise.
Even so, its not doom and gloom for China. Investments account for nearly 45 percent of the Chinese economy.
Investments in foreign assets, from companies to sovereign wealth funds, and nearly any growth opportunity is what Chinas long-term savings are relying on. From America to Africa, when the world was convulsing from the financial crisis, Chinese investors were out on a shopping spree.
With a long-term view of economic growth, China has been scurrying the world in the hunt for energy resources.
And in a long-term effort to walk away from its reliance on foreign consumers, the government in Beijing is embarking upon a plan of encouraging the consumers to spend in the domestic market.
Newly affluent Chinese consumers have been investing in real estate, which in some economic hubs of the country is sizzling at nearly 50 percent higher price tags than last year.
Though not sustainable, it goes to show just how much money there is in the hands of the Chinese consumer.
Experts following the economy closely note that improving social safety systems, easing price controls on capital and altering the dominant position of state-owned enterprises may be crucial for China to sustain its economy in the years to come.
Chinese economic managers have reinvented their work constantly over the past 30 years, embracing policies that work and abandoning those that don . Its likely theyve got a plan!
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