China Leads Global GDP Growth

Many countries around the world have been feeling the strain put upon them over the last few years. The majority are still recovering from major crisis’s such as the 2007 financial collapse or the Eurozone crisis seen in the tail end of 2009 and onwards. However, with recovery coming to fruition many are starting to have a net positive impact upon the world GDP. Despite this, it is still China who are contributing the majority towards the growth rate.

If China’s economy hits the government’s official target of 6.7% for 2016, which it is on course to do so, then the nation will make up 1.2% of the global GDP growth for 2016. While 1.2% may not seem like a significant amount, it must be taken into context. The total growth rate that has been predicted by the International Monetary Fund (IMF) is 3.1%. This means that China is contributing a sizable 38.7%. With so many powerhouse economies existing around the world it is surprising that China is contributing more than their fair share.

There are several reasons why this could be the case. Previously mentioned was the fact that many countries have struggled due to the economic climate both domestically and internationally. The US for example has the largest economy, but with an anticipated growth rate of 2.2% for 2016 their impact on the overall global GDP rate is a mere 0.3%. When directly compared to China this is around 4 times less.

Other reasons also include the fact that China is a large economy that continues to grow at a fast speed. Therefore, it only makes sense that a major fast growing economy would have such an impact. This can also be seen in the example of India, currently 7th when countries are ranked in nominal GDP. However, when ranked in terms of purchasing-power-parity then the country would be ranked 3rd. For India, their expected growth rate is above Chinas at 7.4%, and contributes 0.6% to the global GDP growth. While this figure is considerably lower than China’s, it still punches above its weight when compared next to the shoulders of others.

Stephen Roach, chairman of Morgan Stanley Asia Ltd who is considered to be an expert on economic matters said “China remains the world’s major growth engine.” He also went on to say for continued global economic growth the result would be “heavily dependent” on China, considering the transitioning economy being seen within the nation. Roach also believes that if this transition is successful then many other major economies will benefit as China rises up through the ranks as trading partners.

It may have become an annoyingly common discussion point, but it is just as important than ever. Chinas changing economy has powerful potential that can drive global growth and help fuel and shape the future. In a sluggish economic environment China continues to shine the brightest, and while many concerns have started to be aired about the long term sustainability of this scenario, for now, it looks likely to continue.