Jan 16

China’s Growth Rate is Finally Slowing Down

Countries around the world have recently released their GDP growth rate for the last economic quarter of 2015, and some are a little concerned with what China has to report. Despite the slow recovery the rest of the world has been making after the 2008 global recession, China’s growth rate is now 6.9%–the lowest it’s been since 2009 (Farrer). Economists were actually predicting an even larger drop, however the Chinese aren’t exactly known for providing accurate statistics. They are, however, known for downplaying most of their problems.

These numbers are the first official confirmation of the downturn in the nation’s economy since the Chinese stock market slump, followed by the surprise devaluing of money in July and August (Farrer). But perhaps what has China most worried is their dampened manufacturing sector, which disappointingly shrunk 5.7% in the past year after analysts predicted it would grow by 6%. “The manufacturing industry might cause [the] most concern as it is a pillar of China’s economy,” said Li Huiyong, an economist at Shenwan Hongyuan Securities in Shanghai (Farrer). Indeed, anyone living in the United States has heard the joke about American flags being “Made in China.” But it’s true that because of its huge manufacturing sector we import a lot from China–in fact, they make up over 20% of our total imports on an annual basis–more than any other country, including our neighbors Canada and Mexico (“Top US Imports from the World”).

As a result of this downturn, less people have been investing in the Chinese economy. In fact, many investors have started to put their money into American companies, because of the country’s uncanny economic resilience despite our recent recession. In fact, we’ve managed to bounce back the most since 2008, and are doing better than the European countries, especially because of their refugee crisis and the lowering prices of oil. In addition, with the slowing of China’s manufacturing output, the US may be forced to finally develop its own manufacturing sector, which has shrunk to the point of insignificance after China’s rocketing climb. However, investors are still unsettled, seeing as the Chinese also import tons of products from the United States, as well as spend their money at many American establishments (McDonald’s, Starbucks, etc.) which you can find on almost every corner in their major cities.

While seeing the world’s second largest economy (“World’s Largest Economies”) so uncharacteristically weak is nerve wracking when you imagine the effect this could potentially have on the rest of the world, we should keep in mind that while the Chinese economy is under downward pressure, it has remained relatively stable. A 6.9% growth rate, while slower than what we’re used to from this Asian tiger, is still incredibly good. The US’ GDP growth rate was only about 3% this year, and as I mentioned we’re still doing much better than most countries around the world (“United States GDP Growth Rate”). And meanwhile the Chinese communist government is already making adjustments in order to head a major recession off at the pass. These include lowering interests rates and taxes, as well as stimulating certain sectors (Farrer)–which is similar to what President Obama did in 2009 to dig the US out of our own recession.

In actuality, what this slowing growth rate could really be pointing to is an increase in the overall development of China. China, with a huge amount of its population of living in poverty, has historically been known by political economists as a “Less Developed Country” (LDC). However, as a country develops (i.e. closes its class gap, percentage living in poverty shrinks), it is natural for economic growth to appear to slow. The explanation for this is that many people already have money, and industry is already flourishing, so there are fewer areas for the economy to drastically improve. This explains why the US–a rich developed country–can have a growth rate of 3% and still be doing so well. In addition, the decreased manufacturing output of China could indicate more people entering into service sector jobs, i.e. jobs requiring more skill and training. This would in turn suggest that more Chinese people now have access to higher education. And of course, the slowing growth rate could also have to do with China’s gradual decrease in population–another good thing in a country so overpopulated that it can’t feed itself.

What I’m saying is, most economists that study development have seen this drop off in China’s growth as something inevitable, although not necessarily in a bad way. Besides, the Chinese economy is already so advanced, they’ll certainly be able to handle themselves throughout this recession just fine. I’m interested to see what direction this blossoming country decides to take next.   

Farrer, Michael. “Chinese Economic Growth Slows to 6.9% in Third Quarter Despite Stimulus.” The Guardian. Guardian News and Media Limited, 18 Oct 2015. Web. 25 Jan 2016.

“Top US Imports from the World.” World’s Richest Countries. Homestead, 2015. Web. 25 Jan 2015.

“United States GDP Growth Rate.” Trading Economics. Trading Economics, 2016. Web. 25 Jan 2016.

“World’s Largest Economies.” CNN Money. Cable News Network, 2015. Web. 25 Jan 2016.

Skip to toolbar