China’s New Challenge – The Dangers Of De-industrialization

Though the pace of expansion in the services sector in China has remained strong in recent years to combat the slowdown in the industrial sector, analysts at HSBC suggest such a re-balancing may slow the country’s productivity catch-up in the medium term. In their July 21 research piece titled “China’s new challenge,” Qu Hongbin and Jing Li forecast 6.7% GDP growth in 2016 for China and said they believe worries about the country’s sharp slowdown are overblown.

China’s services growth cushions overall economy’s slowdown

Hongbin and Li attribute the fast industrialization in China to the country’s unprecedented economic growth over past decades. They argue that such fast growth drove millions of farmers away from their land to work in urban factories. However,...