China is the world’s second-largest economy, and its growth has been a major force in the global marketplace over the past few decades. However, recent China data suggests that China’s economy may be slowing down, which could have serious implications for businesses both in China and around the world. In this article, we’ll take a closer look at some of the key indicators of China’s economic health and what they mean for businesses both in China and abroad.
China Data Overview
Foreign direct investment is a measure of foreign ownership of companies in the country, as opposed to indirect ownership through stocks and bonds. In 2014 China data, the country received $128 billion in FDI, making it the third-largest recipient of such investments behind only the United States at $273 billion and Hong Kong at $102 billion. However, given China’s much larger population and GDP, the amount of FDI as a percentage of each is extremely low. For example, in 2014, for every $1 that went to the United States or Hong Kong, only $0.002 ($20 million) was invested in Chinese companies. This presents opportunities for foreign direct investment but also warns of potential volatility due to the limited number of investment options.
A major concern for foreign businesses operating in China is access to the Chinese market, which was valued at $10 trillion in 2014. To give some perspective on that size, if it were compared to other countries’ economies, it would be about one-third larger than Germany’s economy and half the size of the United States’ economy. An investor looking to capitalize on this market should be aware that Chinese consumers may not necessarily make purchases in the same way as those in other countries; for instance, a recent survey by Nielsen found that online and mobile devices were less popular among Chinese shoppers than they were elsewhere around the world.
China Data on Stock Market
The Chinese stock market is often viewed as a barometer for the overall state of the country’s economy. While China’s markets have historically been volatile, it is important to note that they are relatively small compared to those of other countries. For example, in 2014, the total value of all stocks traded on Chinese exchanges was about $3 trillion versus $33 trillion for the United States.
Two major concerns for investors in China are the volatility of the country’s markets and access to information. Chinese stock exchanges operated under a more laissez-faire style between 1990 and 2005, which led to some extreme pricing swings, particularly during this period. More recently, large swings were seen in 2015 in response to economic slowdowns, but also when the Chinese government unexpectedly depreciated the yuan. This has led some observers to worry that information about key economic indicators is not being communicated effectively in China.
China’s Economy Today
In recent years, China has been shifting from an export-based economy to a consumer-driven one that is focused on domestic growth. A key question for businesses looking at this shift is whether or not the country can support continued expansion. In 2014, China’s gross domestic product (GDP) was $10 trillion, which was about 28% of the combined GDP of all 28 European Union countries. By comparison, China’s GDP was only 10% as large as that of the United States.
China has long been a manufacturing-heavy economy, but recent growth has been driven by services and consumption. In 2014, the service sector generated 51% of Chinese GDP compared to 44% from industry (including mining and manufacturing, utilities, and construction). The remainder was generated by agriculture (5%) and other factors such as income earned from overseas investments.
For many businesses around the world, China data shows that its status as a factory floor is well-known. However, there are opportunities for companies beyond low-cost exports.
For decades now, China has been working on its economic growth and it had experienced different kinds of growth phases. With all its economic endeavors, China is expected to continue evolving to meet its national objectives.