Investing

Finally, Real Economic Slowing In China

Douglas A. McIntyre

There have been rumors that the economy in China might slow. They have gone on for almost a year. Now, the evidence is mounting that the growth of GDP in the big Asia country is actually dropping off.

According to Bloomberg, Weaker expansions in economies around the world are cooling demand for made-in-China goods, leading the central bank to last week forecast a “moderate” slowing of economic growth this year.

Governments around the world are notorious for being too optimistic about their economies. China may be doing worse than the internal figures let on.

The drop-off in China is, of course, due to problems in the West hurting demand for its exports. That trouble has only just begun. The consumer, at least in the US, can’t afford gas, food, and a mortgage. That leave the hunger for goods, Chinese or otherwise, undermined.

It is clear to see what a slowdown in America and Europe does to the China economy, but it is harder to see what trouble in China does to the countries which take most of its exports.

The answer is probably fairly little. It is likely that the central government in China will continue to support investment in major industries like telecom, consumer electronics manufacturing, and transportation. China cannot cut back much on infrastructure building because that would leave it a quart low when the economy begins to rebound. The government will, in essence, support strategic imports from overseas even if exports from the country falter.

There are few benefits to having a central political and economic authority, but during the current circumstances, the Chinese government may actual support the growth of goods and services in the West. It is about time that the world’s most populated country returns the favor.

Douglas A. McIntyre