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China’s ‘new normal’ is still astonishing

Customers browse goods in a supermarket in Fuyang, east China's Anhui province. Those who fear China's growth story is over should note that only half of its 1.4 billion people are urbanized.

Widespread international concerns rose when Beijing announced a week ago that it is economy grew by 6.9 per cent in 2015, just neglecting to meet the official target of seven per cent for that year.

The gloomy news out of China continues using its weakening stock exchange, its falling trade figures, its depreciating currency and its softening interest in a range of commodities. Even those discredited advocates of a “China Collapse” from a decade ago have resurfaced to create an “I-told-you-so” comeback.

But even serious China watchers are involved. Will the Chinese economy possess a hard landing? Will the underside fall out of China’s stock market? Will the Chinese government intervene to stimulate the economy, because it did on the massive scale in late 2008, to lift the rest of the world?

Those who fear China’s growth story has ended should note that only half of its 1.4 billion people are urbanized

People long for the old days, when Beijing set a GDP target at the outset of the year, simply to begin to see the real GDP numbers far exceed the state number at year’s end. They miss the commodity super-cycle, which characterized much of the first decade of the century, when China showed an appetite for devouring whatever energy and resources all of those other world could produce.

But let’s put things in perspective.

First, size matters. China’s GDP rate of growth for 2015 is indeed the slowest it has been in the past 25 years. However, it had been still an astonishing US$710 billion more as a whole value than its 2014 GDP baseline – equal to 50 per cent of Australia’s entire economy. In comparison, when the Chinese economy was accelerating at its peak rate in 2007, it added under US$500 billion to the GDP. Therefore the takeaway is the fact that China generated 22 percent more wealth in 2015, when growing at 6.9 percent, than it did in 2007 when growing at 14.2 percent.

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