Why China’s economy is slowing and what it means for everything



It’s really happening.

China, an increasingly important engine of global economic growth, is slowing fast.
Just last week, China’s National Bureau of Statistics reported that growth in the world’s second-largest economy had slowed to 7%, the slowest clip in six years.

Skeptics would note the remarkable coincidence that growth arrived exactly on the government’s 7% growth target during the quarter. But that’s sort of missing the point. The government itself is admitting that its growth targets look increasingly difficult to hit over the coming year. During the week, Premier Li Keqiang was quoted by state media as saying the first-quarter data are “not pretty.”

At any rate, in its annual World Economic Outlook (pdf), the International Monetary Fund projected that Chinese growth would fall to 6.8% in 2015, and 6.3% in 2016.

China LSIB

A big deal, but not too big

This is both a big deal, and kind of not a big deal. For one thing, growth rates of more than 6% are nothing to sneeze at.

[one_half first=] At its fastest, the US economy only managed to reach a 5% growth rate during one quarter over the last decade. And another thing, it’s not as if China is going away any time soon. In fact, by some measures China’s economy is essentially the same size as that of US. (By other measures, such as the small chart above, it’s a bit more than half the size of the US’s nearly $17 trillion economy.) [/one_half] [one_fifth first=] PIC [/one_fifth]


But by both measures, China is at least the second largest economy in the world. Does the fact that it’s losing steam mean we’re doomed to another global slump? Well, no. Thankfully, developed market economies such as the US seem to be in decent shape and set to pick up a bit of slack. The world economy grew by 3.4% in 2014, according to the IMF. And it’s projected to expand by 3.5% and 3.8% in 2015 and 2016.

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