A Sluggish Quarter for China

Published on Author rhynem14


While government figures showed factory-output gains for the last quarter, implying growth for the Chinese economy, the China Beige Book would argue otherwise. The Chinese Beige Book is an independent source of Chinese economy analysis produced on a quarterly basis. This quarter’s publication describes slowing expansion nationwide and fewer companies borrowing money than usual. The average interest rate on loans fell to 6.63%, a 47 basis point drop. Fewer manufacturers and transportation industry groups reported gains.

The Beige Book does not include GDP estimates, but these indications of sluggish growth lend support to the concerns over a growing financial crisis of sorts on the horizon for China. S&P reports that China’s growth rate will range between 7% and 7.5% in the coming months of 2013, but if things continue to slow and growth doesn’t reach expectations, things could get very hairy; not only for China, but the rest of the world’s economy.

Yet, Bloomberg Columnist Jim O’Neill says things are under control, and that China’s government is deliberately slowing the economy. I believe we will see this unfold in the next year, especially as any effects from the United States’ inevitable tapering ripples through the world economy, potentially pushing China closer to their own crisis.

Article link: http://www.bloomberg.com/news/2013-09-24/china-beige-book-shows-slowdown-opposite-official-data.html

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2 Responses to A Sluggish Quarter for China

  1. It is interesting that the China Beige Book would argue against the factory-output gains that were recorded last quarter. Since the China Beige Book is independent, I agree that it be a ploy by the Chinese government to slow economic growth as Jim O’Neill suggests. I agree with him that it seems as if the Chinese government is deliberately doing this for many reasons, one being that they may be trying to gently slow the economy as opposed to waiting and waiting until their is a massive and more severe collapse. In other words, it could be possible that China is deliberately inflicting short-term losses that they can cope with in order to avoid a long-term collapse that would be much more difficult to recover from.

  2. Add a link to the Beige Book, if you can find one.

    Is it saying that the economy is slowing despite a (modest) rise in manufacturing output, or that the government statistics are wrong or misleading?

    Note that if productivity rises rapidly, or capital accumulation is sufficiently intense, you can have manufacturing output gains alongside falling employment: gY = gA + α(gK -gL) with high gY, gA and gK despite negative gL.

    But how much of the economy is manufacturing? In the US, it’s about 1/6th of output, maybe less.