Phase Two of the New Chinese Economy

After headlong growth for over a decade, China is now preparing to focus on consolidating an economic system that favors more equitable distribution of wealth and fosters job development.   Double digit growth in GDP is now a distant memory.

China officially closed 2013 at a more modest 7.7% which, while apparently excellent by western standards, was a difficult undertaking for the Chinese economy. This result also demonstrates the major efforts put into place during the second half of the year to make up for a lackluster performance during first semester 2013. All things considered, the results were satisfactory because they were obtained at a time of deep structural problems with huge local government deficits, exorbitant housing prices in cities and the urban-rural income war.

However, some very positive figures indicate that this new incoming phase could gradually balance the Chinese economy: inflation is under control at 2.5% and the redistribution of wealth in the country seems to have begun with the disposable income of rural people rising versus their counterparts in the city.


Forecasts for 2014 set the expansion rate at an even more modest 7.5%, but according to China’s Central Bank Governor, Zhou Xiaochuan, maintaining a stable, healthy economic expansion is by no means a problem. By contrast, the latest statements made by the government tend to shift the attention to employment, an aspect that is historically even more important for the economic and social wellbeing of China than are GDP figures.

Is all this compatible with domestic market development, that is, with the political decision made last year by China’s new ruling class for the next 10-year period that aims to pilot economic growth towards creating a balance between rich and poor and between the economically more developed areas and those that are lagging behind? It probably is, considering the fact that we are currently seeing the Chinese economy move from a period of explosive growth to one of maturity: massive investments in the public sector and the policies supporting these are bringing large-scale changes, the real estate and construction sector are moving their energies from the metropolis to smaller cities, the standard of living of the middle class is fast improving.

In parallel, the inevitable rise in labor costs is fuelling an increase in productivity and the need for more industrial automation. For the glass industry, this means wide-ranging opportunities for Italian companies, always ready to supply high-tech, reliable machinery.

600450 Phase Two of the New Chinese Economy

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