Essay on In-depth news report China: The Chinese economy reports the slowdown for the seventh consecutive quarter

Currently, China is not a member of the G-7 club of the world’s richest democracies, still, it enters the S5 group or “Systemic Five”ť (five systemic economies, which, according to the International Monetary Fund, have systemic importance to the global economy). China is nowadays the central trading power of the world, which is explained by its huge trade relations with other economies: the Celestial Empire is the largest or second-largest trading partner for 78 countries. Over the past 30 years, the economic growth of China has been making an average of 10% per year, and only in 2011 this figure dropped to 9.2%, though it is last year that China became the second largest economy in the world after the U.S., leaving Japan behind (Zhou, 2012). However, the fast-growing Chinese economy has recently begun to show the signs of durable slowing down. The GDP growth rates of China have been showing decline for the seventh consecutive quarter. During the nine months of 2012, the Chinese economy has grown only by 7.7%, and the increase in industrial production and exports has become the most insignificant in recent years, while import has declined in absolute terms (The IMF, 2012). This is reported to be the most significant decrease in China’s quarterly GDP growth starting from the first quarter of 2009, when the financial crisis experienced the most acute phase (Zhou, 2012). According to various estimates, this year, China’s GDP growth may reach only the indicators of 7% -8%, with the official government target for economic growth making 7.5% (Koech and Wang, 2012). The slowdown of the Chinese economy is today a big concern of other world powers and analytics of global processes and is widely discussed in media.

In particular, Chinese government agencies report that in its annualized form, the industrial production growth slowed down in August up to 8.9% (9.2% in July), which is the lowest level in the last three years (Laiyun, 2012). At the same time, Chinese exports grew by only 2.7% (up to 178 billion dollars). While earlier this year Chinese authorities counted on a 10% increase in turnover growth, it was only 6.2% in a month before the end of the third quarter (Gang, 2012). Overall, China’s GDP in the first quarter of 2012 was reported at the level of 8.1%, and increased by only 7.6% in the second quarter compared with the same period of the last year (Teja et al., 2012). According to the National Bureau of Statistics, in the third quarter of 2012, the Chinese economy grew by only 7.4%, demonstrating again the economic slowdown and falling even below the government bar of 7.5%, which is the lowest bar for the last 13 years. Moreover, the latest data of the National Bureau of Statistics of China also assume a possible decline in the economic growth below the bar of 7% (Laiyun, 2012).

According to the economists, the main or macro reason for current slowing down is the ongoing crisis in the euro area and the U.S. (Zhou, 2012; Gang, 2012). The causers of such a small increase in GDP was also the fall of exports of goods to the EU (-12.7%) and Japan (-6.7%) (Teja et al., 2012). On the other hand, the trade proficit increased due to the decline in imports, which in annual terms fell by 2.6%; and thus, the compression of domestic demand was not long in affecting the consumption of goods from abroad (The IMF, 2012). Other analysts also explain that the problem lies in the fact that the main engine of China’s growth during latest 30 years was not the income (Hongbin, 2012; Koech and Wang, 2012). The goal was factually to increase investment and develop the production, and now there is a need for changing everything and getting it all back to the households. In its turn, country’s leadership in this situation mainly refers to the falling external demand (Laiyun, 2012). The results of the August HSBC survey over 420 companies, many of which were private Chinese firms, confirmed the decrease in the number of orders and the growth of stocks in warehouses (Hongbin, 2012). The ratio of orders to stocks was at the same as in crisis December 2008.

In addition, it is also reported by Gang (2012) on the rise in property prices in 49 out of 70 cities in July, which may, in its turn, delay the implementation of necessary monetary liberalization. The volume of investments in the real estate sector is also reducing.

Leave a Reply