Back in August 2015 we saw a sharp decline in global stock markets. (Isn’t it nice that feels like a while ago now.) These took place for a variety of reasons, but a major one was concern about China. The world’s second largest economy was falling on some hard times and talk was everywhere about their slowing growth. China’s growth is less than half of what it was in 2007! Who’s going to use all of the world’s commodities?! Global demand for oil is going to go away!
All the above would be terrible thoughts if China was actually growing less. In 2007 China hit their highest GDP annual growth number since 1992 of 14.2% according to the world bank. In 2015 their annual GDP growth number was a measly 6.9% (more than 3 times that of the U.S. mind you).† Now that does seem like a stark contrast, the capital markets certainly thought so.
What many failed to focus on though was the actual Chinese GDP numbers. In 2007 Chinese GDP was 3.523 Trillion USD, last year it was 10.866 Trillion USD.† That is triple in 9 years.
Math time. What’s 14.2% growth on 3.5 Trillion? 503.8 Billion. What’s 6.9% on 10.866 Trillion? 749.8 Billion. So even if china maintains these “lower” growth rates China would still grow considerably more in actual economic size than it did even at its 20-year growth rate peak in 2007.
Just some food for thought. Don’t let the news scare you into thinking the world markets are going to suddenly evaporate. They didn’t when China was going to end, they didn’t when the Brits shocked everyone and voted to leave the EU, and if they ever do in the future we’ll have much bigger problems than picking stocks.
†All GDP data from http://data.worldbank.org/
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