Business & Policy
Farmers may offset China’s slowdown
As the harvest gets into full swing in Western Canada, news from China is that the new-found wealth of farmers in the world's fourth largest economy will likely offset a projected slowdown.
September 3, 2008 By CanWest News Service/Calgary Herald
September 3, 2008
The soaring wealth of China's farmers could be the surprise driver of higher consumer spending to offset a widely projected slowdown in the world's fourth-biggest economy, says a leading China analyst.
China's industrial juggernaut is starting to slow, thanks in particular to a decline in demand for Chinese exports from the United States and other Western economies. But the China doom-mongers should factor in "consumption growth that is still strong and broad-based thanks to the strong income growth in recent years, and in particular the faster income growth of farmers," said Qu Hongbin, chief economist for China at HSBC Bank PLC.
"Retail sales have been growing at a pace of over 15 per cent year over year in volume terms in the last few months," Qu said. In particular, "higher food prices have boosted the income of rural consumers, which will allow them to raise their living standard and spend more to catch up with their urban peers."
China's economic miracle has largely been founded on rapid industrialization and an unprecedented migration of the Chinese people from the countryside to booming major cities on the country's East Coast. But in rural areas, recent rapid food price inflation has put more money in the pockets of farmers. Fifty-six per cent of China's population still lives in rural areas, and many are benefitting from soaring demand for food from an increasingly urban population.