Analysis: Macroeconomic Indicators along with values is provided in the below table Macro Economic Indicators| Value| GDP Growth Rate| 9.1%| IIP Growth Rate| 14%| Agricultural Growth Rate| 4.3%| Fiscal Deficit| 800 billion yuan| Interest Rates| 6.56%| Exports| 180.2 billion USD| Imports| 148.5 billion USD| Current Account Deficit| 59.8 billion USD| Inflation| 7.65%| Foreign Exchange Reserves| 3.24 trillion USD|
GDP Growth Rate: * GDP (purchasing power parity) of china is $11.3 trillion second largest in the world. * Most of the GDP is comprised of the exports. China is an export based economy. * GDP of China rose rapidly over past 33 years, Chinese households do not appear to have shared equally in that growth.
* The Growth rate of GDP is averaged at 10% from past 5 years. Even during recession periods china GDP continuously grew at an average rate of 9%. There is a serious concern in the distribution of china’s GDP in which household expenditure and private consumption is low. * Falling share of private consumption and disposable income relative to GDP is largely caused by two main factors: China’s banking policies and the lack of an adequate social safety net.
Chinese households put a large share of their savings in domestic banks. * The Chinese government sets the interest rate on deposits. Often this rate is below the rate of inflation, which lowers household income. Social safety nets such as pensions, healthcare benefits are low in China because of which savings are more in that country, which results in poor spending. * Proper measures in increasing the household expenditure will make china as more independent. IIP Growth Rate:
* Industrial production measures changes in output for the industrial sector of the economy which includes manufacturing, mining, and utilities. Industrial Production is an important indicator for economic forecasting and is often used to measure inflation pressures as high levels of industrial production can lead to sudden changes in prices. * Industrial Production in China increased 9.5 percent in June of 2012.
* The industrial sector includes manufacturing, mining, and utilities. Most of the US firms’ manufacturing division exists in china because of the cheap labor and highly skillful. * China’s IIP growth effects the movement of Wallstreet indexes because of large US manufacturing base.
Agricultural Growth Rate: * The Agriculture; value added (annual % growth) in China was last reported at 4.30 in 2010.
* 50% of china’s population is involved in agriculture. Even though most of the China’s land is unused for agriculture china could be able to maintain a steady growth rate in agriculture at 10%.
* During past 30 years china has seen a dramatic shift from a closed trade country to a market oriented economy. * Agriculture is a vital industry in China, employing over 300 million farmers. China ranks first in worldwide farm output. * China’s agriculture is a diversified composition compared to India because of which it outstripped India in this sector. * Technological advancements have been the major reason for growth of agriculture in china. Fiscal Deficit:
* It is the net value of total government’s income negated from total government’s spending. * Chinese government is trying to improve structural factors of the country in order to promote household consumption which is a major drawback of India. * China reported a Budget deficit equal to 1.1% of the country's GDP in 2011.
* Both the central and local governments will see their fiscal revenues exceed the budgets as a result of increasing intake from import taxes, corporate income taxes, value-added taxes and consumption taxes. *Imports, industrial profits, industrial added value and consumer prices have contributed a lot to the growth of revenue.
Interest Rate: Current value: 6%
* In China, interest rates decisions are taken by The Peoples' Bank of China Monetary Policy Committee. * The current benchmark interest rate in China is now 6%. The rate has been lowered second time in a month’s span. This has been done to primarily bolster the economy which is on its way to record its sixth successive slide in growth in the second quarter * The central bank lowered the lending rate floor to 70% from 80% previously, thereby making loans more affordable. * China has also lowered the cash reserve required of banking via three 50-basis point steps, thereby making an estimated 1.2 trillion yuan available for lending, the last cut being in May. Export:
Current value: 180.2 Billion USD as of June 2012 * Export is a major component of China’s economic growth, constituting 39.7% of its GDP. * Major exports done by China include office machines, telecom equipment, electronic items and apparel. * Major export markets of China are United States, Hong Kong, European Union, Japan & South Korea. * China’s exports reached an all-time high of 181.1 billion USD in May 2012. Imports:
Current value: 148.5 Billion USD as of June 2012 * Imports in China reached an all-time high of 162.4 billion USD in May 2012. * Main commodities imported by China include iron & steel, oil, mineral fuels, equipment, plastics, medical equipment and organic chemicals. * China’s main import partners are Japan, European Union, South Korea and Taiwan.
Current Account Deficits: Current value: 59.8 Billion USD in fourth quarter of 2011
* China recorded a Current Account Surplus of 4% of its GDP in 2011 * China recorded an all-time high of 10.6% of GDP in December of 2007 * This surplus proves the heavy dependence of Chinese economy on export revenues China Inflation Rate
China's Inflation Rate Down to 2.2% in June Published on 7/9/2012 11:41:29 AM | By TradingEconomics.com, SNational Bureau of Statisticsof China * The inflation rate in China was recorded at 2.2 percent in June of 2012. * Historically, from 1994 until 2012, China Inflation Rate averaged 4.2900 Percent reaching an all time high of 27.7000 Percent in October of 1994 and a record low of -2.2000 Percent in March of 1999 * In June, the consumer price index (CPI) went up by 2.2 percent year-on-year. The prices grew by 2.2 percent in cities areas and 2.0 percent in rural areas.
* The food prices went up by 3.8 percent, while the non food prices increased by 1.4 percent. The prices of consumer goods went up by 2.3 percent and the prices of services grew by 1.9 percent. In the first half of this year, the overall consumer prices were up by 3.3 percent over the same period of previous year.
* In June, the month-on-month change of consumer prices was down by 0.6 percent, prices in cities and rural went down by 0.6 and 0.5 percent respectively. The food prices dropped by 1.6 percent, the non-food prices kept at the same level (the amount of change was 0). The prices of consumer goods decreased by 0.9 percent, and the prices of services increased by 0.3 percent. * In June, food prices went up by 3.8 percent year-on-year, affecting nearly 1.20 percentage points increase in the overall price level
. Of which, the prices of fresh vegetables rose by 12.1 percent, affecting nearly 0.30 percentage points increase in the overall price level; prices for aquatic products increased 8.6 percent, affecting nearly 0.21 percentage points increase in the overall price level; the prices of grain rose by 3.2 percent, meaning 0.09 percentage points growth in the overall price level. * Prices for tobacco and liquor went up by 3.2 percent year-on-year.
Prices for clothing rose by 3.3 percent year-on-year. Prices for household facilities, articles and maintenance services went up by 1.9 percent year-on-year. * Prices for residence went up by 1.6 percent year-on-year. Of which, prices for house renting, up 2.9 percent, water, electricity and fuel, up 1.0 percent, and building and building decoration materials rose by 0.7 percent.| | |
Foreign Exchange Reserves
* At the start of the reform era at the end of 1978, China's foreign exchange reserves were minimal, but enough to cover the requirements of a country with a very small import bill. In the early 1980s, export growth contributed to an initial rise in reserves to a peak of US$17.4 billion by 1984.
* High trade eroded the reserves in those years. In 1987 the surplus on trade in services slightly exceeded the merchandise trade deficit, producing a small current-account surplus and a comfortable net capital inflow helped push up reserves to US$16.3 billion. The reserves were held above this level for another two years.
* The economic slowdown of 1989 - 1991 produced a sharp fall in imports in 1990, while exports continued to rise, producing a merchandise trade surplus for that year of US$ 9.2 billion, which was gradually eroded in the next three years as imports rose faster than exports.
* By 1993 the trade and current accounts were in deficit, but the acceleration in inward FDI flows kept foreign exchange reserves rising for most of the rest of the decade. Joining the World Trade Organization (WTO) in 2001 contributed to rapid growth in imports, but exports also expanded at a fast pace, while FDI inflows exceeded US$ 60 billion a year by 2004 - 2006.
* In October 2006, China's foreign exchange reserves exceeded USD 1 trillion for the first time. By the end of September 2008, the reserves topped US $ 1.9 trillion.
* Currently it is at US $ 3.24 trillion.