China’s long transition from a closed, state-run economy to a more open and market-driven model has new helmsmen in President Xi Jinping and Premier Li Keqiang. With China joining the U.S. in the plus-$10 trillion GDP club, Beijing’s shifts have big implications for the world.
Here are five charts showing China’s move from being the world’s factory to a source of capital and demand:
1) Trade villain no more. China’s vast current account surpluses–accrued by exporting way more than what it imports–have spurred perennial claims the yuan is undervalued and that the nation is stealing jobs from Americans. But the actual share of its surplus to the size of its entire economy shrank to below 2 percent, after hitting a peak of more than 10 percent right before the global financial crisis.
2) Slimmer piggy bank. A by-product of China’s export-led growth model was rampant growth in foreign-exchange reserves, which reached about $4 trillion in the middle of last year and have since slipped back a tad. Now, China seems more intent on putting that cash to work to help its companies expand abroad than adding to its pile of U.S. Treasuries. Meanwhile, the cessation of currency intervention and evidence of capital outflows mean the pool may have passed its peak.
3) Bought by China, not Made in China. China has been a magnet for foreign investment from global companies wanting their slice of the manufacturing-fueled miracle. As that fades and excess capacity sends Chinese companies abroad, outbound investment is set to exceed inbound investment for the first time this year.
4) Cheap capital. China’s transition from investment-led growth could flood the world with cheap capital, Deutsche Bank’s global strategist wrote this month. China’s domestic investment accounts for a disproportionate 26 percent of world investment, up from a mere 4 percent in 1995, according to the report. Excess capacity and an aging society will drive that lower, creating surplus capital that will head abroad.
5) Chinese tourists. Thirty years ago, a mainland Chinese tourist overseas was almost as rare as a panda. In 2014, they made more than 100 million overseas trips, providing a growth driver for South Korea and Japan’s struggling economies.