Chinese Economic Growth Slows – But Still Over 10%

Shanghai, 18 July 2008. The rest of the world may be forgiven right now for wishing that it had China’s problems.

Between 2000 and 2007, the pace of economic growth in China rose steadily from just over 8% per annum to just under 12%.

Chinese officials are privately concerned, however, that this rate of growth is slowing. According to the Chinese National Bureau of Statistics, 2008 Q1 growth was 10.6%, while Q2 growth has moderated to 10.1%.

Shanghai, 18 July 2008. The rest of the world may be forgiven right now for wishing that it had China’s problems.

Between 2000 and 2007, the pace of economic growth in China rose steadily from just over 8% per annum to just under 12%.

Chinese officials are privately concerned, however, that this rate of growth is slowing. According to the Chinese National Bureau of Statistics, 2008 Q1 growth was 10.6%, while Q2 growth has moderated to 10.1%.

This slowdown was not a massive surprise. Demand from North America and Europe for export goods has dropped as part of the global economic slowdown, and like most other economies China has to struggle with rising inflation. There have also been challenges from the Sichuan earthquake and the after effects of the ‘quake lakes’, together with a series of curbs on bank lending.

The concern is that the Chinese have become accustomed to rising growth levels. There are already thousands of disturbances across the country every year, many of them full-blown riots. The pace of economic growth has been uneven, and many communities feel that they have been left out or victimized in the modernization process. If the rate of growth slows, civic unrest grows inversely.

With the Chinese Olympic Games less than a month away, there will be short-term boost to the economy. There will also be a less welcome boost to inflation levels and the possibility of an after-part hangover. The Consumer Price Index (CPI) has dropped from 8.7% in Feb to 7.1% in June, but the Production Price Index (PPI) has risen to 8.8%, its highest level since the mid nineties.

However there is growing pressure from exporters to ease monetary conditions to support growth rather than fight inflation. The trade surplus has fallen near 12% this year. The decline is being fueled by the rising value of the yuan and the export tariffs imposed by the central government.

Chinese National Bureau of Statistics chief economist Yao Jingyuan said that the health of the economy and its slowdown is ‘in line with our expectations.’

Chen Xiulian, EconomyWatch.com

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