Oct 27, 2008

China’s Slowing Economic Growth: A Remedy In Itself

China, "the biggest contributor to economic growth" is now slowing down from a 10.1% growth in the second quarter of 2007 to 9% in the third quarter of 2008. Although many see this as a shake in confidence, I feel that China's reduced growth is not harmful to either the global or the American economy. As China's economy has extensively developed over the past three decades, there has been great concern as to when it would collapse. Having grown up in Hong Kong, once a British colony, I am well aware of England's constant concern with China's intensive growth. As seen by past economies such as Japan, many economists felt that it was only a matter of time before China would burst and face a recession. Therefore, the fact that China is now undergoing slower expansion will, in the long run, stabilize the economy and maintain its powerful position. Over the past few days, it has been made clear that Chinese officials are aware of the situation. Many have taken the necessary actions which will prevent China from becoming a permanently troubled economy. Furthermore, the Hong Kong economy has granted China a strong foundation for economic stability.

China has become one of the most labor intensive economies producing the largest amount of exports, it was inev
itable that its economy would be affected the American recession. As seen through a Bloomberg article, the massive plummet in U.S. Bloomberg World Indexes it is clear that China has been affected by the financial crisis. Recent figures show some of the highest percentage decreases which have occurred during the past few months. This does take into account the fact that China's economy is made p from several different, smaller economies. Looking at the split indexes of Hong Kong and China both are suffering from consistent decreases. Having grown up in Hong Kong, I have an ingrained understanding of the importance and enormity of Hong Kong's 'tiger' economy towards China. Although Hong Kong did suffer greatly from the financial crisis having reached its "its worst closing level since October 1982" on October 27th this year many have seen how quickly it has recovered. The China Daily, a resourceful website, recently reported Hong Kong stocks to have soared "more than 1,110 points". A good indications of a strengthening economy. Furthermore other websites have expressed that the 'tiger' city will remain a powerful economy as it suffered the least compared to other financial cities and has a high rate of production given its GDP per capita. Being part of China, this will greatly assist the Asian nation in ensuring stability during these economically unstable times. Furthermore, having returned to Hong Kong this summer, I could clearly be see that although there was a slight set back in consumer spending, this set back was only minimal. Hong Kong, being the freest economy, and thus having the least amount of government, has always been able to recover from such drawbacks as seen by its recovery from the 1997 Southeast Asian economic crisis.

China recently allied itself to European countries while saying it would back Europe's effort to "overhaul international regulatory systems". By doing this China is fundamentally securing its relationship with Europeans countries. This not only allows China to be able to remain well informed on European markets but also grasps opportunities to produce goods for Europeans at a low cost. According to the New York Times the "European Commission proposed a sweeping-stimulus spending package totally 200 billion euros... while officials in China cut interest rates there by more than a percentage point." These measures along with previous precautions demonstrates China's proactive commitment and determination to stabilize the world economy. Having been vague at first on the policies and changes they would make, their most recent reduction in interest rates illustrates their true dedication to solving and handling the economic problems caused by the financial crisis.

Additionally, it is important to put China's current economic growth rate of 9% into perspective. Although China's economy is slowly down, it is still growing. Compared to a rate of 6.1% expected by Europe and Central Asia in 2008, 9% represents a relatively fast expanding nation. Another indication of a secure economy, is that the Chinese currency, the Yuan has maintained its value throughout the crisis. Moreover, Chinese officials have shown an awareness of the current global situation and are taking no risks . By proactively meeting with EU leaders they are securing China's economy.

The slow down in economic growth is extremely important towards China's economy. Given their constantly increasing figures in the years before, many worried that over investment and overcapacity would lead to a collapse. Therefore, it can be seen that this decrease to 9% is a stabilizing factor itself. Additionally China has the strength of Hong Kong markets and are working with EU leaders to reduce the affects of financial crisis on the global economy. With all these factors in play, a slowing economic growth should not create instability for the China's economy. Furthermore, having studied China's history it is clear to me that memories of a collapsed economy as created through the cultural revolution are still prominent in China today, thus the Chinese will do all they can to prevent another recession.

1 comment:

Jessica Hagy said...


Thank you for your interesting and timely post on the economic stability of China. It is a topic I don't know much about and after reading your entry I had learned and also became interested in learning more.

I like the way you referenced articles in your second paragraph but didn't let the sources consume your entry or dictate your opinions. You developed a very knowledgeable and assertive tone throughout the entry.

In your third paragraph when stating that China's economy is more stable than America's I thought it may have been nice for you to give some statistics or numbers to help prove this point. Also, I think it would be nice if you could interact with or reference your images at some point in the post. Other than minor suggestions it was clear to me that you are very informed about your topic and are extremely capable of using sources to back up your own opinion. I think your entry's strongest point was its ability to project authority with important facts to back your opinion.

Overall I was very impressed and look forward to reading more from you.

--Jessica Hagy

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