China Tempers Growth

Published on Author claud

In an article this morning in the Wall Street Journal, Tom Orlik and Esther Fund wrote an article concerning China’s new growth target of 7.5%, as it started to meet and finalize its transition to a new leadership regime. The new growth target seems to mark a change from the “breakneck” growth driven by exports towards a broader economic plan that is driven by domestic spending. This change comes after decades of double-digit growth, and new economic policies will be the focus of today’s annual National People’s COngress.

In previous days, the government has been actively striking down surging housing prices, showing that preventing a property bubble is a clear objective. During the National People’s Congress, all eyes will be on Xi Jinping, the future president, to see if he will make the certain statements to indicate the change that most people see as necessary, ie. changes to raise household income and boost spending.

4 Responses to China Tempers Growth

  1. • Has recent growth really been driven by exports? How can an economist approach that question?
    • What might be indicators that growth is “too fast” and needs be pared? You mention housing prices. Other items?

  2. There has been other stimulus spending on infrastructure projects, and the increasing labor force of migrants also has created growth.

    Perhaps not just housing prices, but the amount of debt in China’s finance sector that has come as a result of stimulus spending. Also, high inflation can cause worries of growth that is “too fast”.

  3. With currency in China being undervalued, and government backed exporting, Export-oriented industrialization has led China to develop an economic strategy where exports are a main element to total GDP. Too much inflation however can belie true growth, but as the Government tends to increase spending in infratstructure, and other aspects in the economy, real growth can begin to happen. Liberalization however may be the key to the new regime and the more they begin to temper levels of corruption and other trade-inhibiting factors, China’s modern economy will not be able to reach its true potential.

  4. On the topic of ‘break-neck’ growth and the possibility of a property bubble, the Chinese ghost cities have been in the news more than just about anything. These completely empty cities are being built with the expectation that growth and expansion will fill them. Is this feasible, especially when the government wants to scale back growth?