China is big but not rich
China is the world’s most populous country. So per person, GDP in China is US$ 6,500, compared to US$53,100 in the US (see chart). Even the most developed cities in China do not approach the income levels of advanced economies. This underscores that China still has considerable room to grow. Indeed, as the IMF’s Managing Director noted in her recent address at the China Development Forum, China has its eyes fixed firmly on its next destination—aiming for “higher quality, more inclusive, and more sustainable” growth.
Size matters…contribution to global demand
The chart shows how much China is contributing to global growth. In 2003-7, China averaged 11.7 percent growth whereas in the coming five years (2015-19) we expect growth to average ‘only’ 6.8 percent. Yet, because China’s economy is much bigger, the average contribution to global growth will actually increase slightly—rising from 1.0 (2003-7) to 1.1 (2015-19) percentage points.
Size matters. Thus, we forecast China to contribute more than before to global output, even though growth is slowing. For exporters, this means China’s expanding market will continue to be a great source of future customers.
And, in the end, the world economy benefits the most from sustainable growth in China. As argued before, the world should welcome the slowdown in China to a more sustainable growth rate. Welcome, because it means much higher income in the future. And, as shown above, it means that China will continue to be an engine of global growth.
