There has been a new buzzword surrounding China’s economy calling it’s current state the “New Normal.”

The Telegraph explains the concept in full, but below are the main points. See the full article here.

China’s New Normal: It has been hard for China to bid farewell to high-speed growth. More than three decades of nearly double-digit growth have not only fuelled the country’s rapid rise to the world’s second-largest economy, but also tremendously improved the living standards of its 1.3 billion people. 

But as single-digit growth becomes an inevitable reality, especially after GDP topped $10 trillion (£6.8 trillion) last year, it is all too natural for observers at home and abroad to wonder how China will adapt to this unfolding era of the new normal.

So what is the “New Normal”

Chinese policymakers have adopted the phrase to define a crucial development stage toward the fulfillment of the country’s two centennial goals: Building a moderately well-off society by 2021 and becoming a fully developed nation by 2049. 

“China’s economy shouldn’t be viewed by only its growth rate,” President Xi Jinping said at the annual Boao Forum last month. “China’s economy entering the new normal will continue to provide countries, including Asian nations, (with) more market growth, investment and co-operation opportunities.”

What does it mean?

The president is trying to assure the world there is no need to be too concerned about the slowdown of the Chinese economy. When the country’s economic growth slowed to 7.4 per cent last year, it alarmed the international media, as it was the slowest in more than two decades. China’s quarterly GDP growth fell further to seven per cent in the first three months of this year, meeting the growth target set for 2015 in early March. 

It is no wonder some observers have rushed to highlight the downward pressure on the economy. Since the global economy has yet to fully recover from the dire consequences of the 2008 global financial crisis, any precaution against a significant slowdown of the Chinese economy, an increasingly important driving force for global growth, was understandable. 

But it would be wrong to regard China’s new normal simply as a buzz phrase invented by Beijing to lower expectations for its economic growth. If fast but extensive growth has been the trademark of China’s economic progress after the late 1970s, slower but sustainable development will define the unfolding age of the new normal, which Chinese policymakers have deemed as a must to deliver their promise of breaking through the so-called “middle-income trap” and realising high standards of living for most people.

Predicted changes

1. Urbanisation: to reduce income disparity between rural and urban areas, China will press ahead with the ongoing course of urbanisation, not only to reap the productivity gains related to the migration of rural residents to cities but also to provide long-term support for the domestic real estate market that has become too hot in recent years.

2. Market Conditions:  to deal with overcapacity and accelerate the industrial upgrade, the Chinese government has vowed to make reform and innovation the most powerful driving force.

3. Clean Energy: never underestimate China’s sense of urgency to address environmental problems or its eagerness to explore opportunities from greener growth. As the world’s largest investor in low-carbon energy, with an investment of about $90 billion last year, China aims to cap CO2 emission by 2030 while increasing the use of energy without fossil fuel to one fifth of the total.

4. Elderly Population: As more Chinese people retire in the coming decades, turning from savers into spenders, it is reasonable to expect more balanced growth powered by mass consumption.

Conclusion

Most of this depends on reforms to China’s fiscal, monetary and financial system, as well as other regulatory changes that are underway. Such structural reforms will take time to gain traction, but they are crucial to the fundamental restructuring and rebalancing of the Chinese economy in the new normal era.

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