With all eyes constantly concentrated on China, it’s necessary to know what’s going on in the powerhouse Asian nation that still commands the majority of the world’s sourcing.
The latest? The International Monetary Fund (IMF) raised China’s growth forecast for 2016, profit growth from industrial operations has slowed and retail sales are slated to double over the next three years.
What’s happening with China’s economy
Despite forecasting global growth down to 3.1% from April’s 3.2% projection, the IMF raised China’s economic growth forecast 0.1% to 6.6% for 2016.
“We have witnessed the determined and decisive implementation of reforms, and there was also support given to the economy in order to encourage growth,” IMF managing director Christine Lagarde said.
China’s GDO rose 6.7% in the first half of the year, stable—and notable—growth compared to other global economies. That growth, according to the Chinese government, comes from upgrades to the country’s economic structure and stable employment. Domestic demand and consumption have increased, too, further fueling economic development.
Though positives are apparent, China’s transition to greater growth will still take some time.
“In the second half, the world economy will still see sluggish growth. There will be pressures from economic downturn for the Chinese economy and more dilemmas in macro policies,” the government noted on its website.
What’s happening with China’s manufacturing
Growth in profits from China’s major industrial firms rose 6.2% year-over-year in the first half of 2016, slowing from a 6.4% increase in the first five months of the year.
June saw an uptick to 5.1% profit growth compared to May’s lower 3.7% due to increased sales, a milder decline in factory prices, lower business costs and destocking, the government noted on its website.
The outlook for manufacturing, however, is still bleaker that it has been in four months.
The government’s Purchasing Managers’ Index (PMI), an indication of economic activity in the country, came in at 50 (bang on the line between expansion and contraction). The number was down from May’s 50.1 and the weakest it’s been since February’s 49.
Economic conditions were weaker in the second quarter of the year than the first, indicating that downward pressure on growth isn’t easing.
In response, Chinese premier Li Keqiang has said China is transforming its manufacturing sector by incorporating the latest technology, like cloud computing and big data, and shifting to accommodate more market demands like customization.
The premier also said the country will continue to open its service and general manufacturing sectors, keep its currency stable and treat both local and foreign businesses equally.
“Manufacturing is the foundation of China’s development and the key for China’s manufacturing sector is to move up the value chain,” Xinhua reported Li Keqiang as saying.
What’s happening with retail in China
Between brick and click, China is banking on the latter when it comes to retail.
Online shoppers in China are expected to grow to more than 40 percent of the total population by 2018, or 587 million people, and online retail sales are expected to double from their current level.
Last year, China’s e-commerce sales grew 39 percent over the prior year to 3.9 trillion yuan ($580 billion), or 13 percent of total retail sales, compared to 10.6% of total sales in 2014 and 8.1% of total sales in 2013, the South China Morning Post reported. In 2015, U.S. online sales reached $342 billion, or just over 7 percent of total retail sales.
“This era is witnessing speedy application of new technology and vigorous cross sector M&A to facilitate e-commerce penetration,” Jessie Guo said in a Jeffries Group research note. “China’s e-commerce is the sweet spot of retail.”