Donnerstag, 21. Januar 2016

Why China's economy may be healthier than you think Yang Jian

SHANGHAI -- The new year did not begin well for China's economy.

This month, the Shanghai stock market has plunged more than 20 percent, while the yuan has been devalued by 1.4 percent.

And here's more bad news: China's economy grew only 6.9 percent last year -- the slowest increase since 1990, according to the National Bureau of Statistics.

A weakening economy naturally will affect demand for new cars and trucks. But for automakers, not all of the economic news is disappointing. In fact, two statistics should be quite encouraging.

The first bit of news is about per capita income, which has steadily increased -- especially in rural areas. Last year, the per capita disposable income of rural residents rose 7.5 percent to 11,442 yuan ($1,700), while urban incomes grew 6.6 percent to 31,195 yuan.

In recent years, vehicle sales in major coastal cities have declined as some municipalities restricted car sales to ease traffic congestion and air pollution. But sales in small cities and rural areas have maintained double-digit growth, thanks to rising incomes of local residents.

Data released by the bureau this week suggest that rural incomes will continue growing, which should ease fears of stagnation.

The second bit of good news is about population trends. According to the statistics, China's population is aging -- but not shrinking. Last year, the population topped 1.37 billion people, up 0.5 percent from 2014. Approximately 44 percent of the people still live in the countryside.

To prevent population decline, Beijing has relaxed its 35-year-old restrictions on family size, which allowed couples to have only one child. Now they can have two, which will improve prospects for population growth.

Yet more good news: Pent-up vehicle demand remains strong. It's important to remember that vehicle ownership in China is still quite low despite rising sales over the past decade. There are only 124 vehicles per thousand people, a much lower rate than in most developing economies.

To be sure, China's economy faces serious challenges. Heavy industries suffer from overcapacity, while exports fall and business investment tails off.

Beijing is trying to ease China's dependence on exports and heavy industry while it promotes a consumer economy. But before that transformation is complete, the economy will stumble.

China's finance minister and government-affiliated think tanks have predicted that the economy will grow 6.5 percent annually over the next few years. By Chinese standards, that's slow. But thanks to rising per capita income and more favorable demographics, the auto market still has a good chance to grow.

And that's probably the best that automakers can hope for as China's economy loses steam.

Pictured: Yang Jian is managing editor of Automotive News China.