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The coming depression blog | January 20, 2019

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Slow GDP Growth in China

Slow GDP Growth in China

 

In the last decade or so, China has been known for a high GDP growth rate, one of the highest in the world. This high pace of growth in China has resulted in China emerging as the second largest economy in the world and an export model that has worked for the Chinese economy. In the last decade China has consistently been growing at high GDP growth rates even at times double digit growth rates. However in the last year or so the GDP growth in China has substantially come down. In the first quarter of 2013, China recorded a GDP growth of 7.7% and in the second quarter this figure has dropped to 7.5%. This rate of 7.5 % GDP growth is still much better than other economies of the world but is still the lowest growth rates China has witnessed in quite some time. This sluggish growth rate of China’s GDP has an impact on the world markets as well as the domestic economy of China. This slowdown could mean unemployment which is a great worry as fears of unemployment could lead to social unrest. Countries that export raw materials for expansion of the industrial economy of China may also suffer due to this.
Reasons for Slow GDP Growth in China
•    China is an export oriented economy and the exports of China have fallen in the last year percentage wise. It is said that the productivity has fallen which results directly into slowing of economic growth of China. Import and exports worldwide will be affected by the slowing down of the Chinese economy which is export oriented. The China’s export oriented model which gave high growth in the last decade is not a sustainable economic growth model for the long term.
•    There are many reform and stimulus measures that are required to be taken by China’s government to help stimulate the economy. These reform measures are absolutely critical for China as without them China will not economically progress into the 21st century.
•    The global economic meltdown and slow recovery in many affluent countries has resulted in overall decrease in spending power. As China is an export oriented economy, it is not completely separated from the global economic situation which often tends to impact the economics in China.
•    An ageing population because of the one child policy, a population that is demanding better pay and better employment welfare is curbing company profits in China.
China is a strong economic power in the world today; however the slowing of China’s GDP is bad news for China as well as the rest of the world.

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