By Isaac Cohen*
At the end of China’s Communist Party Central Committee plenum, last week, President Xi Jinping revealed 6.5 percent is the annual rate of economic growth expected for the Chinese economy under the next five year plan, from 2016 to 2020. Last October, the International Monetary Fund projected China’s rate of economic growth for 2016 at 6.3 percent.
Therefore, the second largest economy in the world will continue sliding gradually toward a different and slower growth model, based on domestic consumption. This contrasts with the previous model, based on infrastructure expenditure and exports, under which the Chinese economy attained spectacular two digit rates of growth during three decades.
Some consequences for the world economy are already present in the form of a drastic fall in Chinese imports, particularly of commodities. For instance, China’s General Customs Administration in October said imports decreased 18.8 percent from a year earlier, a bit less than the reduction of 20.4 percent registered in September. According to the International Monetary Fund, there is evidence that the composition of commodity imports is also changing. For instance, demand for commodities is moving away from metals required by infrastructure investment, such as copper and iron ore, toward higher grade and higher priced metals, such as aluminum and zinc, required by the production of durable goods. The same with food, there is less demand for rice and more for edible oils, meat and soybeans.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.
