Eight percent growth has seen by many economist as a red flag for China’s economy. When China grows less than eight percent, panic is near. But business analyst Shaun Rein explains in an opinion piece for the BBC why the country can remain stable with a lower growth.
There is indeed a deal between the Communist Party and the Chinese people, but what it is really about is not a particular growth figure.
It is about the Chinese government stepping out of people’s lives and continuing to provide ways for them to make money and improve their quality of life from the end of the Cultural Revolution onward.
At this point in China’s economic history, achieving 8% annual growth is no longer essential to accomplishing that, as real poverty has mostly been eradicated.
People on the lower end of the income scale are continuing to get richer in real terms today.
In 2012, China’s lowest earners saw their wages rise by 14% on average, while inflation was held to about 2%.
In fact, my company’s research suggests that people earning less than 3000 yuan ($480; £300) per month are among the most optimistic segment of Chinese society.
That is because they are seeing their incomes rise in real terms and there is strong demand for workers in a shrinking labour pool.
The low-income labour market remains tight, as many factories and companies are running at 20% below ideal employment numbers…
China’s key mission will have to provide real progress on corruption and pollution, as well as food and product safety.
Accomplishing this will be necessary to maintain social stability, but will not necessarily mean reaching 8% annual growth.
In fact, lower growth is healthy, as it will force officials to green-light sustainable businesses, rather than merely approve anything that can help economic growth, despite the effect of pollution.
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