I
n my previous post, I talked about China’s slowing down economy. As President Xi pushes reform and a slows growth, analysts say that 2014 will be a turning point. With the action plan for air pollution prevention and control in September 2013, China has started to ease surpluses in production capacity and achieved tangible results. Now 22 provinces are cutting their GDP growth targets, which will affect the national economy’s growth rate.
Xu Sitao, chief representative of the Economist Group in China, argues that China has to sacrifice part of its growth to implement reform policies. He says, “Reform and growth have apparent contradictions.” He predicts that China’s growth rate for 2014 will be 7.2%, which is lower than 7.5% prediction. However, as TIME argued, slowing the pace is not bad. With the development of the service sector, China’s economy can meet higher employment needs with slower economic growth. Stephen Roach, senior fellow at Yale University, said “China’s service sector required about 30 percent more jobs per unit of GDP than manufacturing and construction.”
Xinhua ends its article by saying China’s economy is faced with weak exports, over capacity, debt risk, and spillover effects from the U.S. QE tapering. However, China hopes that the reforms can save its economy and itself.
It seems that China’s economy is slowing is coming from every angle. Part of this is China is beginning to move from a producer to a consumer. While all countries have to produce China like Japan in the 1970s has spent decades producing without enjoying the benefits of consumption. As the standard of living rises we should see the Chinese consumer as an ever more vivid face in the world of consumption.
Yes, exports bring no direct utility to domestic consumers, though of course a job is a job and some level of exports is necessary to pay for imports [cf. comparative advantage]. Trade surpluses (at least above a certain level) make that tension clearer: as an economy people are sweating to send goods overseas in return for pieces of paper with pictures of national monuments and dead heroes or [worse] virtual credits in a foreign bank account. Neither directly enhances utility.
Good, in that you implicitly answered some of the queries in my comment on your previous post. You might go back and add a paragraph to it, or start off with an additional paragraph or two here to make explicit.
Consider merging this post with your last to improve it. Again, I agree that some sectors of the Chinese economy are growing out of whack with the market.