Chinese Economy on the Rebound

Published on Author Duncan

As the latest macro-numbers for the 4th quarter came out last week, China (both the people and the government) is rejoicing that the numbers show a turnaround in growth occurring in the final months of 2012 (their worst year in 13 years with 7.8% annual growth). In a recent article from, one of the significant points of China’s growth was a rebound in the profits of major industrial firms (17.3% annual growth). While this shows that the Chinese economy, which is heavily reliant on the export model, is still afloat, the questions of how and when China will restructure its growth model  remain.

I am wondering if China (the people and the government) views this news of rebounding numbers as a reason to press on with their growth model for a longer period of time, or if they view this past year as the first sign of an unsustainable system of growth.

2 Responses to Chinese Economy on the Rebound

  1. I read an article last week that said that foreign investment into China declined in 2012 for the first time in many years. The consensus was that China will probably have to make certain changes in order to improve this statistic, but it is important to keep in mind that foreign investment makes up a small percentage of China’s economy ($110 billion out of $2 trillion in international exports). So to answer your question I think the Chinese consider their economy stable as a whole, but changes can be made to improve certain areas, and experts expect these changes to begin to take place when Xi Jinping takes over in the near future.

  2. This issues are linked — growth and FDI — but less strongly than it might seem. FDI is affected not just by market prospects, but also by the competitive level of incumbents and by exchange rates and local labor costs. All are working against FDI. As to growth, have exports been central for the past 6-7 years? How could we build a model to separate sources of growth? For example, can exports be a source of growth if they don’t grow faster than GDP? How should we adjust for imports (look only at X-M = net trade…)?