A new report shows China’s move away from industrialization and construction to consumption and services is happening much quicker than previously thought
China’s economic growth is expected to slow to 7% in 2015 and may even slip below that – the slowest pace since 1990.
While slower overall growth has long been expected, the transformation of China from an investment-led to a consumption driven economy appears to be happening much quicker that previously thought.
After the years of breakneck infrastructure investment, urbanization and industrialization that created the supercycle in commodity demand, Beijing is now shifting focus of policy to the services-orientated sectors of the economy.
A chart from oil giant BP’s Statistical Review of World Energy 2014 report shows how the energy intensive sectors of the Chinese economy “virtually collapsed”.
This strategy of curbing the once red-hot property sector and placing restrictions on heavy industry also ties in with the government’s fight against pollution after years of devastating environmental damage.
And much of the country’s so-called war on pollution is centred on coal where the change in direction is just as startling.
Spencer Dale, BP’s chief economist, commented that China’s rapid urbanization and industrialization turned coal into the fastest growing fossil fuel over the first decade or so of this century.
“And it was equally true in 2014 as Chinese demand braked sharply and coal became the slowest growing fossil fuel,” says Dale.
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