http://sinosphere.blogs.nytimes.com/2014/01/20/china-growth-figures-show-rapidly-narrowing-gap-with-u-s-economy/?_php=true&_type=blogs&ref=economy&_r=0
Everyone knows that with China's increasing industrialization they are becoming a larger threat to the United States, but on Monday it was released that China's economy is growing roughly four times as much as the US economy. Even after adjusting to inflation China's economy grew by 7.7% just last year compared to the United States 2% growth. From 2003-2013 China's economy became five times larger, to about $9.2 trillion. This is approximately half the size of the US economy.
While the economy has been growing, it is being questioned how much longer China can keep it up. China has been financing the growth with rapid expansion of money and credit. Even large companies are paying interest up to 8% on loans, and small to mid sized businesses are having to use local money-lenders to borrow money. It will be interesting to see how China fares over the next few years.
I do not necessarily view the slowing Chinese economic growth as a negative situation. In fact, it should be expected that the Chinese economy will slow as some point. The current Chinese economic restructuring policies are intended to promote higher levels of consumerism in the market. If this works, the Chinese economy can become more developed and even have a higher standard of living. Some of the reforms that have been mentioned by Chinese President, Xi Jinping, include eliminating speculative lending and other obstacles to growth.
ReplyDeleteAlthough it is true that China's economy is still growing, there are already signs of the economy slowing down. There was a recent report about China's manufacturing sector, the one of the key driver's of China's economic growth, showing contraction this month. I believe that slowing down of China's economic growth is inevitable, but the government is doing various things to sustain the economic growth, including launching a free trade zone in Shanghai as a test zone. The results of this would certainly be interesting.
ReplyDeleteFor the time being it seems that China's massive growth doesn't pose a direct threat to American economic interests. Just as many countries around the world are doing China is taking advantage of its huge pool of cheap labor. As other posts have mentioned low skilled manufacturing is on the way out in the United States. This low skilled manufacturing has really been the engine of growth in China.
ReplyDeleteThe United States's manufacturing is overwhelmingly composed of capital intensive, high skilled manufacturing of machinery and technology. The danger China poses is in its eventual emergence into this type of manufacturing. With the massive amounts being invested in capital development AND highly skilled labor China could eventually overtake the United States as a pre-eminent manufacturer of complex technology.
Overall however this can be a good thing. Large amounts of high tech manufacturing are limited to the United States, Japan, and a few European countries like Germany at the moment. China's emergence would represent a massive expansion in the high tech productive capacity of the entire world and necessarily increase competition. However it is impossible to determine who would benefit most from such increased competition.
I think that China will continue to be a major player in the world economy and I think that an economic slowdown was to be expected, due to their large amount of growth. In the manufacturing side of things, China is a very strong force and it will be interesting to see how the country will hold up in the future.
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