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For years, China has grown fat on a diet of low-cost manufacturing, exports, and investment, an economic regimen that pushed the country closer to becoming an economic powerhouse. Yet, today, its GDP growth rate “languishes” at 7.4 per cent, a number that would satisfy most countries. With Premier Li Keqiang saying at the start of China’s annual National People’s Congress meeting on March 4 that China would aim to grow its economy at 7 per cent, it is clear that the economic slowdown in China has begun.
While such a slowdown may sound like a bad thing, it is the transition towards a more sustainable economic structure - dubbed “the new normal” after President Xi Jinping used the phrase on a 2012 inspection tour in Henan province - that will transform the country into one where quality of life is valued over economic success at all costs.
The new normal - perhaps Xi’s most important official catchphrase along with the “China Dream” - represents an economic structure that favours quality growth over quantity.
 “In 2015, China’s GDP growth rate is likely to decrease to 6.5-6.9 per cent, which is still relatively close to the new growth target of ‘about 7 per cent,’” says Dan Steinbock, research director of International Business at the India, China & America Institute (United States) and visiting fellow at the Shanghai Institutes for International Studies (China).
“In the short term, that outcome will require more support from the policymakers, including new rate cuts. In the medium term, it will also provide a compelling rationale and powerful incentive to accelerate structural reforms, in order to move away from growth fuelled by investment and net exports to growth driven by consumption and innovation.”
According to China’s National Bureau of Statistics on February 27, domestic consumption made up 51.2 per cent of GDP growth for 2014, compared with 48.6 per cent for investment and a paltry 0.2 per cent for net exports. And with per capita disposable income climbing to 20,167 yuan (HK$25,504) last year, up 19 per cent from the previous year, the environment in China is ripe for domestic consumption to drive the country forward.
Such a transformation will require substantial reforms if the shift is to succeed. The biggest challenge ahead for China is how to approach a sputtering property market, the real estate sector driving growth in recent years.
“The volatility of [China’s] property markets is the result of a decade of strong but tumultuous expansion,” Steinbock says. “Today, Chinese real estate is tackling oversupply via price correction. In 2013, sales soared to 27 per cent in the property market. In 2014, the market contracted by minus 8 per cent. This year is likely to see milder contraction and flat growth. The downside risks would increase with a major stimulus package but the latter is not in the cards today.”
Another test will be the labour situation. With a slowing economy comes less new-job creation, reflected in Premier Li’s commitment to the creation of 10 million new jobs in 2015, down from 13 million in 2014. With 7.27 million new college graduates in 2014 and around 15 million jobseekers, finding employment for as many as possible remains a key aspect of social stability.
“Since 2010, we have seen a relative decrease in the size of the labour market in China,” Steinbock says. “That was only to be expected, in light of the realities of demographics and ageing.
“The market’s resilience, however, is reflected by the fact that in 2014 the 7.4 per cent growth added the same amount to output as when the economy was growing at 10 per cent years ago. That resilience requires ceaseless gains in productivity, upgrading of efficiencies and enhanced innovation capabilities.”
The central government has big plans to revitalise vocational education and training centres in an attempt to boost employment and is also encouraging China’s young visionaries to start their own companies and businesses through a series of preferential policies and promises of further government support.
Along with an increasing emphasis on the Silk Road Economic Belt and 21st-century Maritime Silk Road, the new normal is what will lead China into the future. While there will be many bumps along the way, a sustainable Chinese economy that values quality of life over all else is worth every effort.


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How quality of life will become China’s most valued asset

More sustainable economic structure will transform China into a country where quality of life is valued over economic success at all costs


For years, China has grown fat on a diet of low-cost manufacturing, exports, and investment, an economic regimen that pushed the country closer to becoming an economic powerhouse. Yet, today, its GDP growth rate “languishes” at 7.4 per cent, a number that would satisfy most countries. With Premier Li Keqiang saying at the start of China’s annual National People’s Congress meeting on March 4 that China would aim to grow its economy at 7 per cent, it is clear that the economic slowdown in China has begun.


How quality of life will become China’s most valued asset

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}More sustainable economic structure will transform China into a country where quality of life is valued over economic success at all costs

More sustainable economic structure will transform China into a country where quality of life is valued over economic success at all costs