Every week, there are mountains of global economic data to shuffle through. The past week’s info has Farm Credit Canada’s vice president and chief agricultural economist, JP Gervais, thinking about the direction of China’s economy.
“If we just focus on China, economic growth of 6.7 percent — that’s actually pretty strong,” says Gervais, referring to China’s Q3 numbers published on October 19. “It’s not the pace of economic growth that we’ve seen going back three, four or five years, but I think it’s very, very strong, and it does have a major impact on the ag markets.”
When most people consider strength of an economy, they focus on Gross Domestic Product, but that can feel a bit like an “obscure black box,” says Gervais. What really matters is disposable income.
According to the new data from China’s National Bureau of Statistics, the country has seen a 7.5 percent increase in disposable income in the first three quarters of 2017, compared to the year previous. That’s the fastest pace since the same period in 2015.
This means two things, says Gervais: more, and higher value purchases.
It’s good news in a world that is seeing growth in production, especially in agricultural commodities like oilseeds.
“I believe that going back five years, it was really more of a pricing game,” says Gervais. “But now, if you look at the last five years, there’s clearly a shift in the environment, where global production has grown quite a bit.”
The world needs strong demand to absorb increases in production, he says, and Chinese signs are pointing in the right direction.