China’s economic evolution

September 4, 2019


There has been a huge shift from manufacturing to services in China in recent years, and the economy continues to transition away from growth driven by fixed-asset investment, to consumption-focused growth, particularly through consumer services. This is led by private enterprises that are run with a profit motive and tend to be less capital intensive, unlike the fixed-asset boom, which was dominated by state banks funneling credit into other state-owned entities and property developers.

With the fixed-asset intensity of the economy declining, GDP growth is likely to continue to slow, however the quality of growth is set to improve. A slower rate of GDP should not, in our view, hinder the consumer-facing areas of the economy particularly, as the labor share of GDP increases and because many service industries are still quite nascent.

Consumption-focused growth will spur on tertiary industries that represent a growing share of GDP and dominate the growth contribution. Additionally, policy changes bode well for service sectors, such as education, healthcare, insurance and internet-based businesses.

Rob Marshall-Lee, investment leader emerging markets and Asian equity team, Newton Investment Management, a BNY Mellon company

Recommended for You

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon Investment Management product.

BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

“Newton” and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Investment Management (North America) Limited (NIMNA Ltd) and Newton Investment Management (North America) LLC (NIMNA LLC). NIMNA LLC personnel are supervised persons of NIMNA Ltd and NIMNA LLC does not provide investment advice, all of which is conducted by NIMNA Ltd. NIMNA LLC and NIMNA Ltd are the only Newton companies to offer services in the U.S.

Views expressed are those of the manager stated and do not reflect views of the other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information should not be construed as investment advice or recommendations for any particular investment. Certain information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Management, Newton and BNY Mellon Securities Corporation are subsidiaries of BNY Mellon.