August 2, 2019

News in Charts: The rise of China

by Fathom Consulting.

It is impossible to understand the global economy without thinking about China, which is why much of Fathom Consulting’s research focuses on that country’s economic development and the effect it has on the rest of the world. Fathom has created the podcast series ‘The rise of China’ to showcase this work. Our next three contributions to News in Charts will provide highlights from the ten-part series, drawing on Fathom’s China expertise and proprietary material, together with Refinitiv’s 350,000 new China data series which will be available to all Datastream users.

The introductory episode of Fathom: In Conversation introduces the team at Fathom Consulting, their in-depth China research and wide range of proprietary economic tools. This brief introduction paves the way for the rest of the series which explores China’s extraordinary economic boom, looking at how the economy has expanded by a staggering 4000% since 1952 and the impact that growth has had on the rest of the world.

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Episode 2 (China, the elephant in the room) explores China’s economic and political journey from the start of the 20th century to the beginning of the 21st. Economist Andrew Harris and Fathom’s CEO Erik Britton discuss how the key to understanding the China of today is understanding its communist roots and how Chairman Mao adapted Marxism for the Chinese economy. These decisions, taken more than half a century ago, continue to shape Chinese society and influence policymakers’ decisions.

The period of incredibly fast growth since Deng Xiaoping came into power in the seventies saw China adapt an export- and investment-led growth model, undergo rapid industrialisation, and ultimately transform into the economic powerhouse it is now. The impact China’s emergence had on the real standard of living for people in China has been undeniably positive; the ‘Elephant Chart’ — arguably the chart of the century — demonstrates the massive reduction of inequality at the global level and can, to some extent be attributed to the growth of China.

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Want more charts and analysis? Access a pre-built library of charts built by Fathom Consulting via Datastream Chartbook in Eikon.

Episode 3 (The day that changed the world) examines what happened after China joined the World Trade Organisation in 2001 — a monumental milestone for China’s integration into the global economy. In this episode, Andrew Harris, Kevin Loane and Florian Baier explore the wider impacts of China’s emergence, both domestically and internationally.

It can be argued that the greatest impact has been felt domestically as millions of Chinese people have been lifted above the poverty line. However, the Gini coefficient — a measure of inequality — shows there are still extremely high levels of inequality in China, both by its own standards and when compared to other countries. When comparing China to the US, it is ironic that a communist country has proven less successful at redistributing income than one of the most capitalist countries in the world.

The impact of Chinese growth on emerging economies is broadly positive, with many commodity-exporters enjoying ongoing economic benefits as a result of increased demand from China. Less widely recognised is that, as the world’s biggest travel spenders, Chinese tourists also have a powerful impact on international services trade; in 2001, China spent less than $15 billion on tourism while by 2018 this had increased to almost $280 billion.

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Episode 4 (China leapfrogging up the global value chain) discusses why, although China has become the leading exporter of low-end manufactured goods, its progress has stalled in recent years. The country has produced various plans to upgrade its enormous manufacturing base and move into high-tech markets; the most recent being President Xi Jinping’s Made in China 2025 (MIC) plan. However, Fathom’s RiCArdo database — which allows for detailed analysis on the nine high-tech MIC industries, with data on export values, shares and country specialisations and which will soon be available through Datastream — shows that progress in this field has stalled.

Fathom’s China specialists, Laura Eaton and Joanna Davies, draw insights from this tool to discuss China’s attempts to move up the global value chain and through Fathom’s Capital Flows Database — which tracks Chinese FDI by sector and destination — reveal the sort of tactics China has deployed in an attempt push into high-tech sectors.

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For more information about Fathom’s RiCArdo, Capital Flows Database, or any other Fathom proprietary indicators, please contact enquiries@fathom-consulting.com.

The charts in this post have been created using Chartbook on Datastream. The Chartbook, created and maintained by Fathom Consulting, is a library of over 9000 charts, containing up-to-date macro and financial market data for over 170 countries. Whether it is a particular topic, country or variable you are interested in charting, the Chartbook has everything you need. Simply type search ‘cbook’ into your Eikon search bar or click the ‘Chartbook’ tab on Datastream to find out more.

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Refinitiv offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

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