China made two announcements about its budget. One was that it has revised its growth forecast to 7.5% for 2012. For an economy that has grown at a rate of 10% over the last decade, the lower level is practically a recession. China says it will try to hedge its challenge with exports because of a slow global economy with a drive to increase consumption within its own borders. That decision may not make sense. China’s consumer activity relies on factory employment which relies on exports. China also said it would increase its defense budget by 10.5%. The total is only about a quarter of the US’s, but the People’s Republic believes it has to make the investment, to some extent because of America’s military presence in Japan, South Korea, and Taiwan. Of course, one advantage to the spending is that it will create jobs. Perhaps that will help China’s other goal of increase consumer spending.
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