CHINA’S GROWTH

CAN CHINA TAP THE BRAKE ON GROWTH?

Dan Kadlec

Time, November 13, 2010

In a remarkably short time, China's economy has blossomed into the second largest in the world. Only five years ago, China's GDP was half that of No. 2 Japan, which the Chinese eclipsed earlier this year. Next stop: the mammoth U.S. economy — a milestone that is a decade or two away and yet all but certain.

China's epic growth is an old story; its economy has been racing along at 8% to 10% annual growth for 30 years. But now, with a GDP approaching $5 trillion (vs. $14 trillion in the U.S.), China is such a powerhouse that its every move ripples around the globe.

Which is to say you can't ignore China — even if you aren't directly invested — at least not for the next 100 years or so. Pay particular attention to China's latest move, which has been to rein in its breakneck growth. Most countries would love to have this problem. China raised interest rates last month for the first time in three years and has taken other steps to slow bank lending and cool a sizzling property market. Growth slowed to 9.6% in the third quarter, down from 11.9% in the first and 10.3% in the second.

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