An Economic Issue Facing China

Published on Author walkerc

In a lecture given at the Heritage Foundation, it was stated that there are four issues China is currently facing.  One of those issues is the economy.  It is clear to see that China has experienced one of the most rapid growths in the past few decades.  The main argument behind the idea that China will have to face problems in the economy is that conditions that allowed for such rapid growth will not be present in the future.  “China has relied extensively on lower wage rates and export-driven growth. But wage rates have been bid up, as happens; the Chinese are victims of their own success, you could say.”  At the same time, China will not be able to rely as heavily on exports since countries can no longer import as much as they used to.  The Chinese government has even reported that that economic growth per year will drop about 4% in the next decade. (see second article below).  Do you think these projections will come true?

3 Responses to An Economic Issue Facing China

  1. Is China’s growth due to exports? Perhaps a decade ago, but certainly not since 2008!! That’s one of the points I tried to make on Wednesday [31 Mar 2013]. For growth to be export led, net exports (X-M) have to grow faster than GDP. So net trade would need to grow at (say) 15% pa … which between the power of compounding and slow growth of world markets would mean China would account for the vast majority of global trade, which is not just unlikely but absurd.

    Now is [future] slower growth really a problem?

    oh, and clean up typos … you can then delete this line.

  2. I think it’s very hard to project China’s growth. I certainly think that it will slow down in the future, but I’m not sure if it will begin to truly decline any time soon.

  3. Yes, I do believe China will experience smaller growth rate as predicted because China’s economy might lose its competitive edge in the future. China might not be able to sustain cheap labor in the future because as the GDP of a country increases, the living standards of its citizens increase. People are able to afford better schools and these educated people in China might not want cheap, low wage jobs but may want to shift to professions with better salaries. As a result China may loose its competitiveness.