Can China continue its growth as the rest of the world falters?
The WSJ sees China’s growth continuing…
Fixed-asset investment in urban areas between January and July rose 27.3% from a year earlier, the National Bureau of Statistics said Friday. The pace exceeded the first half’s 26.8% rise and the median 26.5% rise forecast…robust growth in investment and retail sales suggests economic growth will be resilient
…while the developed world sputters:
the European Union’s statistics agency said gross domestic product in the euro zone contracted 0.2% in the second quarter, the equivalent of a 0.8% annual rate of decline. It marked the first time since the early 1990s that GDP has fallen overall in the 15 countries that use the euro…The global weakness marks a sharp reversal of expectations for many corporations and investors, who at the year’s outset had predicted that major economies would remain largely insulated from America’s woes…
in a sign the world is dialing back its shopping spree of the past few years, the Baltic Dry Index, a measure of demand for shipping services, has fallen 37% since hitting a record on May 20, including a stretch of 23-straight down days…”The global economy is sputtering amidst a widening in the slowdown from the United States to Western Europe and Japan,” J.P. Morgan economist David Hensley said in a note to clients Wednesday. That slowdown, he said, “is feeding through to the emerging economies.”
If China’s growth is still 70% dependent on exports, as it was a couple of years ago, we wonder how it can continue to grow swiftly, as is currently predicted. Indeed, we are very skeptical, and find the “fixed-asset investment” explanation unpersuasive. “Fixed-asset expansion” quickly can become “overcapacity” in a time of reduced demand — the US was in the process of massive “fixed-asset expansion” in 1929, after all. In any event, we likely will be learning the answer soon.
August 16th, 2008 at 5:13 pm
China could continue to grow through a world recession for the same reason that Wal Mart does. They are the low cost supplier that people turn to when their finances are tight.