COMMENTARY
Signs of Slowing: Growth, trade surpluses and stocks fall in China
April 17, 2008
Christopher Bjorke, AFP

China has revised its growth for 2007 upward to 11.9%, but there are signs of it cooling in the face of the recession brewing in the United States.

The National Bureau of Statistics upped the growth rate from 11.4%, according to the China Daily newspaper. The new number reinforces the amazing growth that China experienced in the past year.

This year, however, most observers expect the economy to cool somewhat. The International Monetary Fund put the growth rate at a still impressive 9.3%. Such strong growth comes at right time, too, as the U.S. enters a slow period.

However, some signs point to China being dragged down slightly.

According to the Xinhua news agency, a People's Bank of China economist said that the U.S. downturn could reduce China's gross domestic product by 1%. The economist, Fan Gang, also said that the rapid flow of investment into China could cause a drastic appreciation of the yuan, hurting orders to Chinese producers.

At the same time, China's trade surplus has shrunk for the first time in three years, the Wall Street Journal reported this week. Bank lending also slowed in the first quarter of this year.

The slowdown in exports is attributable in part to weakening demand in the U.S. and the appreciation of the yuan against the dollar. At the same time, China's imports of raw materials have been growing, further narrowing the trade gap.

China's markets also experienced some tremors this week when the CSI 300 Index and the Shanghai Composite Index fell 6.5% and 5.62%, respectively, following the announcement of continued monetary tightness.

Strength remains

Despite some signs of a cooling economy, China is still poised for growth that makes other countries seem listless by comparison. The World Bank also recently reported that the country had become the second largest economy by purchasing power, ahead of Japan.

Economist Geoffrey Bell, in an interview excerpted in this edition of Asia-Pacific Headlines, said that the economic downturn is likely to be felt most in places like the United States and Britain and less and less the further one gets from New York and London. Even if the credit crisis drags down China more than predicted, as Bell put it, "9% growth is not exactly a recession."

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