Though the trade surplus again grew this month, news late this week of a slowdown in the pace of Chinese growth sent some ripples through the markets in Asia and the rest of the world. Still, there is very little consensus on what this really means. And, is 8.3% growth really a bad thing?
The fact is that China’s leaders set a target for growth that is 7.5% to bring down inflation levels and, thus far, the economy continues to grow faster than that. However, the slowdown in Chinese growth has not been entirely due to these internal decisions, which is part of the concern.
The sense is that China does not consider the lower demand shown in February trade statistics as foreshadowing a crisis, but they are not ignoring the implications either. China soon will be getting a new set of leaders, and there will be pressure on this new team to show that they have the issues in China well in hand. The population is still expanding in China, and there is still a need to find over 1.3 million jobs a month to accommodate the new arrivals into the workforce. At the same time China is well aware that the aging population is going to put a strain on the working population over the next few years. The country can’t afford to stagnate when it comes to expansion, and that will put a damper on the inflation effort sooner or later.
NOTE: For more information on FCIB’s two-day “Doing Business in China” webinar (May 9-10), or to register, click here: http://tinyurl.com/7fpc95h. To take part in FCIB’s International Credit and Collection Survey on the topic of the BRIC (Brazil, Russia, India, China) Nations, click here: http://tinyurl.com/847jwqq.
Chris Kuehl, PhD, NACM economist