8% Growth Will Prove to Be A Stretch For China in 2009

Wednesday, January 21, 2009 20:52
Posted in category The Big Picture

For those who are placing bets on China’s growth figures, and what this year has in store, the recent Bloomberg article China’s Economy Grows 6.8%, Slowest Pace in 7 Years should leave little doubt that hitting 8% this year is going to prove long odds for China.

Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs

For many, 8% has been “the figure” by which to judge China’s stability – economically and otherwise, but as one of my friends recently said..

that 8% figure is based on 2003 numbers, so 5% should be just fine

Update – I was passed the link to a National Bureau of Statistics article National Economy: Steady and Fast Growth in 2008 where my friend made the following observations:

(I) secondary industry GDP increase only 9.3% compared to 13.4% in 2007
(II) value added only 12.9% compared to 18.5% in 2007
(II) profits 4% compared to 36.7% in 2007
(III) fixed asset investment 25.5% compared to 24.8% in 2007
(IV) retail sales up 21.6% compared to 16.8% in 2007
(VI) CPI still worrying
(VII) Q408 exports -8.8%, imports +4.3%
(VII) whole year export growth 17.2% compared to 25.7% in 2007
(VIII) urban incomes 14.5% (8.4% after inflation), rural 15.0% (8.0% after inflation) – 2007 was 12.2% and 9.5% after inflation
(VIII) urban unemployment up 0.2% to 4.2% – indicator of problems ahead

I guess only time will tell what 2009 really has in store for China’s economy. For me it is not necessarily the 8% figure that I am most concerned with, it is how they get here. With the tragectory clearly going the wrong way, it will mean that an offset of some kind will need to occur later in the year to balance out at 8% at the very end.

What are the lengths policy makers will go to hit 8% – what are the lengths local governments will go to report 8% – and what are the lengths people will go when both of those do not work in their favor… these are the questions that left to be answered.

For more of my thoughts on China’s path to 8% growth, you can read my previous posts:
Will the Economic Downturn Will Increase Social Instability in China? My take.
China Economic Prospect 2009 – Peking Professor Perspective
There Are Many Ways China Can Hit 8% Growth – Part 1
There Are Many Ways China Can Hit 8% Growth – Part 2

You can leave a response, or trackback from your own site.

3 Responses to “8% Growth Will Prove to Be A Stretch For China in 2009”

  1. Clement Wan says:

    January 21st, 2009 at 9:25 pm

    I think another question to ask is what incentive China has to tell the truth. I’m not much of a conspiracy buff, but at least when it comes to China, still a relatively closed society when it comes to government and governance, how would any of us know the difference between 5 and 8% or even 0 and 8%? Forgetting even for a moment how crude their measuring sticks are.

  2. Rich says:

    January 21st, 2009 at 10:15 pm

    Clement.

    That is my concern as well. We all know the lengths which officials went to in order to boost their FDI/ GDP figures before… which was not a problem when everyone was employed, energy was in short supply, and inflation was shooting up.

    .. but when things are going down faster than a local GDP indicates, and people are out of jobs, the consequences are far different

    R

  3. EvdB says:

    January 26th, 2009 at 6:00 pm

    I fully agree, so therefore we should go back to basics; look around and see what is happening. In the streets, in shops, at construction sites and when visiting restaurants. Real economy is not about numbers, but actual trade and services. One of the thing that has been underlying the financial meltdown there were a lot of products and activities measured that had nothing to do with real economy anymore. So my eyes are on the streets for the next 12 – 18 months, and talk to people who are at the ‘receiving’ end of the economic development (or not).

Leave a Reply