A CHINESE SLUMP?

IS A CHINESE ECONOMIC SLUMP ON THE HORIZON?

Robert J. Samuelson

The Washington Post, January 9, 2012

Even China? Could the world’s economic juggernaut, having grown an average of 10 percent annually for three decades, face a slowdown or what for China would be a recession? Does it have a real estate “bubble” about to “pop”? What would be the global consequences? Treasury Secretary Timothy Geithner visits China and Japan this week. These questions form a backdrop. With Europe’s slump and America’s sluggish economy, a sizable Chinese slowdown would be bad news.

China inspires ambivalence. Its policies — especially its undervalued exchange rate — are skewed to give it an advantage on world markets. This has cost jobs in the United States, Europe and developing countries. Still, China is now such a powerful economic force that an abrupt slowdown would ripple beyond its borders. Trade would suffer. China’s protectionism might intensify to offset job loss. If surpluses of steel and other commodities were dumped on world markets, prices and production elsewhere would fall.

There are warning signs. Economist Nicholas Lardy of the Peterson Institute cites three. First, Europe’s slump has weakened China’s trade; Europe buys about a fifth of its exports. Second, housing is showing signs of a bubble and is deflating. Finally, China’s government will have a harder time deploying a stimulus than during the 2008-09 financial crisis. Government debt rose from 26 percent of gross domestic product in 2007 to 43 percent of GDP in 2010.

How all this affects China’s growth is controversial. “Most likely, China will have a soft landing,” says Justin Yifu Lin, the World Bank’s chief economist. “Growth goes to 8 percent or 8.5 percent.” That’s down from about 9 percent in 2011. Government debt is still low enough to permit ample stimulus, Lin thinks. Many forecasts agree.

(...) [artículo aquí]