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China’s “New Normal” Proves Positive as Economic Growth Exceeds Expectations

Slowdown aside, China’s economy is growing at a better-than-expected rate.

The country’s GDP for the first three quarters of the year grew 6.7% to 53.9 trillion yuan ($8 trillion), and the National Bureau of Statistics of China owed that growth to progress in implementing the nation’s new concepts of development and leading the new normal.

The buzzwords of that new normal, as John Cheh, vice chairman and CEO of Hong Kong-based Esquel Group explained at the Sourcing Journal Summit 2016 in September, are transformation, innovation, technology, adaptation and structural change.

Despite challenging domestic and external conditions, the Statistics Bureau said things have progressed well under the leadership of the country’s Central Party Committee and the State Council.

“All regions and departments earnestly implemented the new concepts of development, actively accommodate and led the new normal, adhered to the general working guideline of making progress while maintaining stability, appropriately expanded the aggregate demand, unswervingly advanced the supply-side structural reform, steered to the positive development anticipation and accelerated the fostering of new drivers,” a statement out Tuesday noted.

Manufacturing grew steadily as companies increased their efficiency, with the value added rising 6.9% year on year. The high-tech industry fared even better, growing 10.6% and accounting for more than 12 percent of the value added across the entire industrial enterprise sector, a nearly 1 percent improvement over last year.

Exports from industrial operations were fairly flat to last year, slipping just 0.1% to 8.59 trillion ($1.28 trillion). For the first eight months of the year, profits from industrial entities grew 8.4%, 2.2 percentage points higher than the first half of the year as profits ticked up almost 20 percent in August alone.

The overall decline in imports and exports narrowed and general trade increased in the period. The value of imports and exports for the first three quarters of 2016 slid 1.9%, a full 1.7 percentage points lower than in the first six months of the year. For exports specifically, total value was down 1.6% to 10.1 trillion yuan ($1.5 trillion), though the contraction is slowing. China’s exports to Pakistan grew 14.9%, to Bangladesh 9.6% and India took in 7.8% more goods from China.

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China’s transition to supply-side structural reform and increased efficiency saw progress in the period too.

“The efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak links achieved substantial results,” the bureau said. By the end of August, inventories of finished products from industrial operations were down 1.6%, marking the fifth consecutive month of decline.

While the effects of the aforementioned, however, made for steady growth, China’s economy still isn’t out of the woods.

“We must be aware that the economic development is still in a critical period of transformation and upgrading, with old drivers of growths to be replaced by new ones. With a number of unstable and uncertain domestic and external factors interacted, the foundation of continued economic growth is not solid enough,” the bureau said.

Looking forward, China will have to continue its efforts to lead the new normal with new development concepts and advance its supply-side structural reform if it hopes to meet targets outlined for this year, according to the bureau.