China’s GDP Slowdown: Loss of An Economic Leader?
China’s GDP Slowdown: Loss of An Economic Leader?
China has faced a slowdown in growth in recent times. Its lowest growth in six quarters is leading economists to predict its rapid downfall. China’s economy is bubble-prone and it is possible that the current slowdown is a result of secular growth. However, others could also see it as result of changes in the world’s economic patterns of growth and development.
The current slowdown in China’s economic growth is one part of the picture only. China’s economic policies will play a greater role in influencing the prospects of this Asian giant in the coming months. There are many economic and financial instruments which can be used to jumpstart the lagging economy. A better assessment is needed of what lies ahead and it can make a great difference to the world as well.
If China faces a change in economic prospects, this could lead to a massive impact on power equations in the world. While the US and Europe are aiming to put the financial crises behind them, the situation is still developing slowly because there are many variables involved. GDP alone is not a strong predictor of possible future trends. Nor is it the only index which affects the future growth of the country. A new policy response may or may not be forthcoming.
A slowdown can also make a positive impact on China’s growth prospects if managed carefully. The bulls and bears on the stock market are expecting a slowdown in growth as a result of current GDP figures. But, it could also be that lower growth is critical for rebalancing the economy. China’s growth story is full of twists and turns, but steady leadership and strong policies can make a huge difference to its future.
GDP is only a single point of measurement. There are many other ways to assess the progress of any economy. While China’s growth at 7.4% is the lowest in a period of a year and a half, questions regarding its future as an economic leader are still unanswered. However, it should be noted that the GDP has limited accuracy so confident assessment is not possible unless more economic measures are taken into account.
Boosting domestic demand is the key to China’s success. Many experts feel that the growth model based on investments and exports has become obsolete for China. Whether the current GDP indicators point to a positive or negative slowdown is being debated now. What remains clear is that China is experiencing its lowest growth since the 1990 figures.
China is in transition currently. Though it is currently a $9 trillion economy, most of the growth has been spurred by exports and investments. Any nation needs to capitalize on its domestic consumption patterns so that it can experience stable and sustained growth. Relying on external factors for spurring domestic growth will only end in tears.
Slowdown in growth in China is not a new phenomenon. Growth has been slowing sharply since the year 2011 for this Asian giant. Recent GDP data is just a signal for a prevailing trend. China experienced double digit growth before this and a shift is now imminent. Net exports will no longer be the focus of China. Consumption becomes the focal point. This transition could boost economic activity by leading to a reduction in the trade surplus of China.
A controlled slowdown could also have a positive impact. While the slowdown is bad for exporters and commodity producers in the initial stages, any type of credit boom or unsustainable growth would have had even worse repercussions for the global economy. While many analysts and experts are wondering if the slowdown in growth can have a negative impact for the world economy, the results of the economic fall in fortunes are still ambiguous at best right now.
