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Wednesday, March 09, 2011

Eichengreen: Slowing China

Barry Eichengreen warns that China's economy may be headed for a slowdown:

Slowing China, by Barry Eichengreen, Commentary, Project Syndicate: With the world’s rich countries still hung over from the financial crisis, the global economy has come to depend on emerging markets to drive growth. Increasingly, machinery exporters, energy suppliers, and raw-materials producers alike look to China and other fast-growing developing countries as the key source of incremental demand. ...
Chinese officials are convinced that a slowdown is coming. ....[I]n response to foreign and domestic pressure, China will have to rebalance its economy, placing less weight on manufacturing and exports and more on services and domestic spending. At some point Chinese workers will start demanding higher wages and shorter workweeks. More consumption will mean less investment. All of this implies slower growth. Chinese officials are well aware that these changes are coming. ...
So what is at issue is not whether Chinese growth will slow, but when. ... [A] significant slowdown in Chinese growth is imminent. The question is whether the world is ready, and whether other countries following in China’s footsteps will step up and provide the world with the economic dynamism for which we have come to depend on the People’s Republic.

All the more reason -- besides the risk of rising oil prices and other uncertainties -- to be wary of doing things now such as reducing the deficit or raising interest rates that might make it even harder for the economy to recover. There are enough potential headwinds in the air already.

    Posted by on Wednesday, March 9, 2011 at 01:08 PM in China, Economics, International Finance, International Trade | Permalink  Comments (10)


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