Ignore the gloomsters, says Rupert Foster. Growth will slow for now, but the economy is undergoing a healthy transition to consumer-driven growth. The process will prove stronger than demographic headwinds.
• This article is the second in a two-part cover story. Read Jonathan Compton’s counter argument here: China will get old before it gets rich
Larry Kudlow, Trump’s main trade adviser, said last August that the Chinese economy “looks terrible”. Stockmarket investors appear to agree. The Chinese domestic A-share market has slid by a fifth this year and the renminbi is down 7%. Foreign investors’ favourites such as internet giants Alibaba and Tencent are down by at least 30% from their 2018 highs. GDP growth fell to 6.5% year-on-year in the latest quarter, compared with 6.9% in 2017 as a whole. Some analysts expect 6.1% in 2019.
China’s temporary struggles may reinforce President Donald Trump’s belligerence. He calculates that if the US pushes hard against the Chinese economy it will prove to be a “paper tiger” and collapse. To stave off a slump, China will be forced to sign a new Treaty of Nanking (the one-sided treaty forced on China by the UK at the end of the First Opium War in 1842, which broke open imperial China to foreign trade). Shortly before Kudlow’s statement on the health of the Chinese economy, he said, “I’m not a China expert, although I’m boning up as fast as I can”. But would a teacher give him a pass grade for his economic assessment? Spoiler alert: no.