Monthly Archives For April 2013

Why China Can Maintain 8% Growth

, , Comment Closed

China’s National People’s Congress (NPC) has set a 7.5% official GDP growth target for this year. Lin Yifu, former Senior Vice-President and Chief Economist of the World Bank, and one of China’s most important economists, predicts that China can maintain 8% annual growth for 20 years. A key question is evidently whether such targets are realistic. Can China maintain this type of growth rate?

The immediate negative factors are evident. The international context for China’s economy this year is bad. The Eurozone economy is shrinking, Japan is stagnant and US growth is anemic. A 16% fall in world commodity prices since their peak has led to slower growth in major developing economies such as Brazil.

China’s policy makers initially underestimated the problems in the advanced economies. Adjusted for inflation, imports by developed economies have not regained pre-financial crisis levels. China therefore did not achieve its 2012 target of a 10% trade increase – the actual rise was 6.2%. The lower 8% trade growth target set for 2013 is more realistic if still challenging. All major motors for growth will therefore have to come from China’s domestic economy.

In terms of strengthening China’s relative international economic position, and maintaining its ranking as the world’s most rapidly growing market, all this makes no difference. China is the world’s most open major economy, so it cannot cut itself off from international trends. China’s growth rate inevitably goes up or down with global economic fluctuations – the constant is that China strongly outperforms these trends.

Read Post →