Why China’s Growth Rate Matters

11.04.2015
Economy

As the world’s second largest economy, China is a major consumer of oil, building supplies, metals, food, and other commodities — which means China’s slowdown impacts every economy in the world.
Trading partners in Asia, Europe, Latin America, and Australia are tied much more closely to China than we are; but we also trade with those countries. So their economic loss could spell trouble here as well.
For the U.S., it’s a mixed bag: Lower energy prices benefit consumers and most states; but the price drop also hurts the oil-producing center of our country. And companies involved with commodities or major construction equipment are already hurting from China’s slower growth.
What’s the real growth rate?
Nobody truly knows, but few trust the official Chinese figure of 6.9%. A group of six research firms — mostly well-known names, such as Bloomberg, Nomura, and Barclays — have their own tracking formulas for Chinese GDP. Their recent figures range from 2.9% to 6.6% growth, with an average of 5.4%.
If these figures are anything close to the truth, it means a critically slowing Chinese economy.
China watchers speaking at the National Association for Business Economics in October agree: The slowdown has begun in earnest and will get worse. They think China will suffer a U.S.-type Great Recession with overloaded debt, a bursting real estate bubble, and stock market shocks.
If any of this is right, it’s time to check your exposure (and your vendors’ and customers’) to the Asian giant.

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