Assumptions about the Chinese Economy: High Growth, Leveling Off, or Downturn?

Our assumptions about the future security environment depend heavily on assumptions about the growth of the Chinese economy.  Not too long ago, the orthodox view was that China’s high rate of growth would continue into the future.  This view was particularly pronounced in the wake of the 2008-09 global recession.  More recently, there has been a growing body of evidence and opinion to the effect that the Chinese economy is slowing down.  This, in turn, could be the prelude to China assuming a more “normal” rate of growth, or even to a downturn in the Chinese economy.

It seems to me that each one of these scenarios has security implications, both positive and negative.  So which scenario is most likely?  And what are its implications?

By tgmahnken Posted in GT2030

3 comments on “Assumptions about the Chinese Economy: High Growth, Leveling Off, or Downturn?

  1. It is more likely that China’s economy will slow down than keep the same fast pace it has had for a number of decades.

    Here is why: China doesn’t want the growth. China’s inflation was at 6 percent, double digits for some catagories for a number of those years it was growing so fast. The people in China are more worried about inflation today than they are interested in GDP numbers. In fact, nobody cares about GDP numbers in China; most watch only the inflation number. If the status quo continues, the government is going to face serious legitimacy problems.

    Second, manufacturing is moving out. This doesn’t mean manufacturing is shrinking; it means that low end manufacturing is moving to other countries like India and Vietnam, while China is growing high tech manufacturing. The compeition in this area is more fierce, and they do not have an advantage in high skilled workers as they did low skilled workers. China education system is horrible! Most of the “engineers” in China are actually the western equal to “technician.” As well, the large players in high tech manufacturing are already integrated into the supply chain. The US and Germany aren’t going anywhere. As China gives up low manufacturing to vietnam, China will have to import more and imports will decrease the GDP growth as high tech exports fail.

    Third, the people are not hard working. Yes, Chinese work long hours. More than half of those hours are spend using the internet, checking their weibo accounts, or talking on QQ. Managers are not innovative. Most Chinese managers feel they have already made it to the big time and therefore do not need to work as can hire someone to do everything. Most managers in China I know sit and drink tea all day.

    There are many problems, and to anyone who has worked in China for even a few years these problems are obvious. The only way GDP will continue to grow is if the central governement continues to give out bad loans for development projects that make no money and convince sucker foreigners to invest in nothing.

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