The renowned economist who coined the acronym BRICS told CNBC that he’s started to worry about some parts of the Chinese economy after several decades of stellar growth.
Speaking at the Ambrosetti Forum on the shores of Lake Como, near Milan, Jim O’Neill said that China has become an integral part of the global economy, and any slump would have the potential to drag other major economies lower.
“I have to say, for the past year, for the first time in 30 years I have been a bit more troubled about some aspects of China’s path than I have been before,” the former Goldman Sachs Asset Management chairman told CNBC’s Steve Sedgwick on Thursday.
The world’s second-largest economy grew 6.6 percent in 2018 — the slowest pace since 1990. Recent consumer data has also spooked market watchers. Retail sales growth in 2018 declined to 6.9 percent year-on-year, from a 9.1 percent increase the year before. There’s also been plummeting auto sales, fears over household debt, and firms like Apple warning about falling demand in the country of 1.4 billion.
But some analysts have said the services sector remains resilient and highlight stimulus measures that the government has introduced like personal income tax cuts and cash injections from the central bank.
But for O’Neill, these actions will be carefully watched and will only add to his concerns if they fail with their aims.
“I hope the policy initiatives that the Chinese authorities have just undertaken since the turn of the year, which are very geared towards the consumer are going to help. Because otherwise that would be troubling,” he said.
“About 85% of all global GDP (gross domestic product) this decade has come from just the U.S. and China, half of all global GDP has come from China, of which half of that has been the Chinese consumer. So the Chinese consumer has increasingly, albeit slowly, mattered more and more for the whole world economy, not just for themselves … That is crucial in my opinion.”
