China’s fixed ambition has for many years been to become the richest economy in the world, and it has adapted its tactics to the geopolitical environment several times in order to achieve this goal. The most recent tactic is what Fathom calls the ‘broken wing’: allaying the fears of its trading partners abroad by drawing attention to the many structural weaknesses that beset the Chinese economy. Those weaknesses are not new, but the tactic of acknowledging them now certainly is. Refresh this chart in your browser | Edit the chart in Datastream Thanks to its accession to the World Trade Organisation in

Fathom’s measure of China’s high-tech exports reached an all-time high in 2021, facilitated by rising demand for high-tech goods during the COVID-19 pandemic. China increased its market share mainly in advanced railway, extending its dominance as the world’s largest high-speed railway exporter, and in medical equipment, driven by unprecedented external demand. China’s revealed comparative advantage is still poor in key technologies such as robotics, however, imposing a drag on the automation that the country urgently needs in order to achieve sustained economic growth. Over the past few decades, China’s growth model has been characterised by exporting low-skilled manufacturing products to

China’s GDP growth in 2022 Q2 was much weaker than the consensus expectations of economists polled by Reuters. The economy contracted by -2.6% on a quarter-on-quarter basis and expanded by just 0.4% over the latest twelve months, the second lowest reading since records of quarterly data began in 1992. On a sectoral basis year-on-year, manufacturing output fell by 0.3%, construction rose by 3.6%, and tertiary industry (which includes retail and wholesale sales, transport and services) contracted by 0.4%. In the latter, particular weakness was evident in real estate and in accommodation and catering trade. Looking at the trajectory of growth,

Fathom’s measure of economic activity in China, the China Momentum Indicator (CMI), posted just 4.4% in July, suggesting that growth is a third weaker than official data imply. Refresh the chart in your browser | Edit chart in Datastream Contrary to some, we do not believe that this slowdown reflects a strategic decision by China to rebalance the economy at a time when any negative impact on growth can be blamed on US trade sanctions. Indeed, it is happening despite of a lack of ‘rebalancing’. Recent measures of consumer appetite reinforce the message. Real retail sales growth — one of the ten

The latest reading from Fathom’s China Momentum Indicator (CMI) suggests that China’s economic growth slowed sharply to 6.4% in the twelve months to November, with all but two of the ten sub-components exerting a drag. In our view, this slowing is not a consequence of economic rebalancing. Indeed, prompted by the CMI pointing to a slowing of growth amid escalating trade tensions in 2017, we have long argued that China’s policymakers would lean more heavily on old-model growth, throwing in the towel on rebalancing, in a bid to support the economy. Refresh the chart in your browser | Edit chart in Datastream

Annual retail sales growth in China dropped to lows not seen since 2003 in November, raising further uncertainty about the prospects for the world’s second largest economy. Last year, the authorities implemented measures aimed at curbing the growth of credit. That policy tightening appears to have weighed on economic growth this year. Domestic concerns are being exacerbated by external ones. The Chinese economy could face further headwinds from US trade policy. As things stand, the Trump administration is scheduled to increase the tariff rate applied on around $200 billion worth of imports from 10% to 25% in March. Faced with

This week, in a working paper, the IMF released its latest take on China’s efforts to rebalance, confirming our view, and the finding of our proprietary China Growth Strategy measure (CGS), that China threw in the towel on rebalancing in 2017. In recent months, this return to ‘old-model’ tactics has helped arrest the slowdown in China’s economic growth, which began late in 2017 and extended to July this year, with the latest reading from our China Momentum Indicator (CMI) unchanged from August’s 6.6%. Refresh the chart in your browser | Edit chart in Datastream Just four out of the CMI’s ten subcomponents