Consulting firm says world’s second largest economy is increasingly relying on its own consumers for growth
The world’s exposure to China has grown while the country’s growth has become less reliant on outside influences according to a new report.
Global consulting firm McKinsey’s Global Institute says that China is seeing stronger growth from its own consumers, accounting for 60% of GDP growth in 11 of the 16 quarters since 2015.
At the same time, other nations have become more reliant on China as a trading partner, exacerbating issues such as its trade dispute with the US and tension with Canada following the Huawei CFO’s arrest in Vancouver earlier this year.
McKinsey’s simulation suggests that U$22-37 trillion in economic value (equivalent of 15-36% of global GDP) could be at stake from less or more engagement with China in five key areas.
These include its growth as an import market, liberalization of services, globalization of financial markets, collaboration on global public goods, and flows of technology and innovation.
If the world has less engagement with China there could be higher tariffs, limited trade and technology flow, and greater challenges in addressing global challenges.
But greater engagement could bring benefits including rising imports from the rest of the world, better flows of technology, and a more competitive Chinese services sector.
China’s ability to generate its own growth is highlighted by the report’s stat that the country is home to 110 of the Global Fortune 500 companies, attractive to investors, but they generate less than 20% of their revenue overseas.
The report says that companies should assess their short-term and long-term exposure to the relationship between China and the rest of the world and be prepared for the risk that uncertainty in that relationship creates.
