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WILL CHINA BE ABLE TO WEATHER THE STORM?

Pablo Bustelo

January 29, 2009

English translation of an Op-Ed in El País (Negocios), Madrid, January 25, 2009 (this version, with updated figures, is slightly different from the one published in the newspaper).

The international crisis is beginning to have adverse effects on China, whose economy – which, according to the data recently released, became the third largest in 2007, surpassing Germany – has grown until now very rapidly, contributing considerably to global expansion. Let’s simply recall that China’s GDP growth was 13% in 2007, the highest rate – with difference – in the world. China was responsible of 17% of global growth, measured in purchasing power parity, between 2000 and 2007, a proportion similar to the one of the EU, whose economy is five times greater, and even larger than the percentage of the US, which has a GDP four times greater.

The provisional figures for 2008 suggest that China’s GDP increased around 9% in 2008, a still very considerable rate. However, the quarterly rates, which surpassed 10% in the first and second quarters, were 9% in the third and only 7% in the fourth. The forecasts for 2009 vary between the 8% of the official estimate and the 6% of the Economist Intelligence Unit, with the 7.5% of the Word Bank in between.

Do we really have indications that China might decelerate its growth to half – from 13% to 6% - in only two years, between 2007 and 2009? This would be certainly bad news, partly because China has been, along with the US and the EU, a main engine of the world economy and partly because it is widely acknowledged that, below 8%, growth might not be enough to create the required jobs and, hence, to maintain social and even political stability.

(...) [complete article here, PDF file]