China Collapse Good for No One

What would the future of the world economy be if China’s growth were to plunge? It is a scenario many China bears have predicted. With both official and private figures released this month pointing to a stronger economy, they will probably be disappointed again.

Still, a “China collapse” would be good for no one, given the weight of the country’s economy, Xinhua wrote.

Ever since the global financial crisis, China has been the main engine and stabilizer of global economic growth and trade recovery. Data from the International Monetary Fund showed that China contributed more than a quarter of global growth each year between 2009 and 2015.

Despite a protracted slowdown, China’s contribution to world growth in 2016 is again poised to top that of all other countries, even exceeding the figure for all developed economies combined.

The IMF has projected China’s growth to be 6.6% with global growth at 3.1% in 2016. Taking into account China’s 17.3% share of the global economy in 2015, the country would contribute about 1.1 percentage points—more than a third—of global economic growth for 2016.

However, China’s growth last year appears set to hit 6.7%, the same as in the first three quarters of 2016 and beating the IMF forecast. If that rate is achieved, China will account for 1.2 percentage points of world growth.

  Record Investment

Megadeals in China helped bring a record $31 billion in venture capital investment into the country in 2016 despite a sluggish global economy and a sharp drop in the number of new deals, according to a report.

Venture Capital investment in China rose 19% to account for around a quarter of the global total of $127 billion last year, even though the number of deals declined 42% to just 300, according to KPMG’s (a global auditing firm) quarterly report on global VC trends.

China saw its two biggest deals for the year in the first half of 2016: $1.2 billion in funding for peer-to-peer lending platform Lufax and Apple’s $1 billion investment in taxi-hailing app Didi Chuxing.

Despite cautious investor sentiment shown in a 9.4% drop in global investment value and a 24% slide in deal count in 2016, average investments in China are getting bigger and bigger.

The deal count in China has more than halved over the past three years but investment has tripled from $12 billion in 2014. Beijing alone has attracted $37.3 billion of venture capital since that year, including $18.5 billion in 2016.

The strong performance in China is expected to continue in 2017 with artificial intelligence, where investment is “growing by the day,” a new focus for investors, KPMG said.

 Exports Tumble, Imports Fall

China’s massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the US that is clouding the outlook for 2017, Reuters reported.

In one week, China’s leaders will see if president-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.

Even if the Trump administration takes no concrete action immediately, analysts say the specter of deteriorating US-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

The world’s largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7% and imports down 5.5%. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.

It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China’s exports due to greater protectionist measures, the country’s customs agency said on Friday.