Has the dreaded China crash finally arrived?
10 July 2012 (The Week) – China’s leaders are warning that the country, a reliable engine for the global economy in recent years, is facing “huge downward pressure” This week, Chinese Prime Minister Wen Jiabao warned that the Chinese economy is facing “huge downward pressure,” the bluntest message to date from Beijing about the Asian powerhouse’s economic problems. China’s GDP growth is still expected to clock in at a relatively impressive 7 to 8 percent in 2012, but that is considerably slower than the jaw-dropping 10 percent rate it has recorded in recent years. With exports falling and the real estate market cratering, China’s government has taken steps to boost economic growth by cutting interest rates and approving new infrastructure projects. However, some analysts worry that China’s “stimulus lite” policies will do little to prevent a hard fall, which would have negative consequences for the U.S. and other countries that have come to rely on China to fuel the global economy. Is China on the verge of an economic crash? Yes. And the fallout could be severe: China’s economy is “weakening more rapidly than official statistics would suggest,” which could lead to “a much sharper decline” than what many economists expect, says David Pierson at The Los Angeles Times. The ongoing debt crisis in Europe has stifled Chinese exports, while flatlining consumer demand within China has led to thousands of layoffs, stagnant sales of heavy machinery, and record amounts of coal and iron ore going to waste. Soon it will be obvious that China is in the midst of a “painful slowdown that could be felt around the globe.” “China’s growth is slowing, raising risks for world economy” Maybe. But a slowdown wouldn’t be all bad: The Chinese government “has lots of levers to pull and can avoid a crash,” says Angus Walker at ITV News. And remember, China is in the midst of a historic transition from being a producer of cheap goods to a fully industrialized country. That means the government wants the economy to slow a little bit as the country reduces its dependency on exports. “The problem comes when the gear change is clumsily executed.” If China botches the transition, it could find itself in real trouble. “Is China’s slowing economy in crisis or transition?” No. China’s economy is about to bounce back: Of course China’s economy is slowing down after its “super-high growth phrase,” says Evan Osnos at The New Yorker. But even so, China’s robust, resilient economy is “still on pace to overtake the United States as the world’s largest economy by 2020.” And there are already signs that the slowdown has bottomed out, meaning an economic rebound could soon be underway. “If China was a stock, it would be down now, but, viewed from another angle, that means it is cheap.” “Is China running out of steam?”
Has the dreaded China crash finally arrived?
