The economy

Climbing, stretching and stumbling

China’s disappointing new growth figures are not the end of the world

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"ENGINEERS used to dominate Chinese policymaking. But the Communist Party’s highest organ, the seven-member standing committee of the Politburo, now includes three economists, for better or worse"

Well it's better than having lawyers (ie. professional liars) as leaders.

kommonsenses in reply to sambhu10

'the main advantage china has been holding was that of 'manipulated depreciated currency'
but do you mean to tell me QEs at the us, uk, or now in japan was not 'manipulated depreciated currency' when Chinese currency has been appreciating so much already?

makes one wonder where did you get that funny idea.


Gentlemen at TE, you do underrate Engineers severely. Engineers do understand everything the Economists do, and can put their concepts in a practical perspective. The reverse is not always true.

China's growth requirements are dictated by the need to provide social stability through a decent life for all. The Engineers in charge there, as well as the Economists, understand that all too well.


Yonkers, New York
19 April 2013

For the better part of the last forty or so years, China's economy had achieved what the whole world considered as "phenomenal," an average annual rate of growth of ten percent! As a result, China has dislodged Japan as the second wealthiest nation in the world.

That led many people to conclude that China had found the secret to being invulnerable to the traditional cycle of booms and busts which has plagued most if not all of the world's economies. Now here is convincing proof that China's economy is slowing down in fact--and that such a conclusion is premature.

But China's leaders have the intelligence and the will to fix whatever problems are diagnosed to be at the root of this slow-down in its economy. China's government is not subject to the constraints which, for instance, is the bane of Washington where the House of Representatives is controlled by Republicans and the Senate by Democrats, a state of affairs that has led to stalemate and gridlock.

My sense is that in no time at all, China's economy will again be exploding at the usual annual average of ten percent. Give it, say, thirty more years and there is a very good chance that China will be the No. 1 economy in the world.

Mariano Patalinjug


Well written article on China.

‘Quality not quantity

Just like its figure of populations, what China is in want of is not quantity but quality. Officials in government, especially at local levels are wild with the GDP growth to the neglect of quality, which leads to the increase of fraud and corruption and even more short-term behavior; those who have access to money and power feel that they need to make their move now.

Really hope there will be more such objective analysis published by TE.

Tierras Altas

1.1 job vacancies por every job applicant sounds like a paradise. If it were 0.9 it would be tight. In Europe for every young person under 24 there is 0.5 job vacancies. Seen from Mexico, China is still doing fine and might import some skilled migrants, to cover the 0.1 it cannot cover from local job seekers.With some luck it will not place a banker as the secretary of the economy as most o Europe and the US have done now for a couple of disastrous decades.


Reuters reports this morning: "China's economic growth is forecast to pick up slightly to 8.0 percent in 2013, after an unexpected slowdown in the first quarter that forced economists to lower their earlier predictions.

And, after a strong start to the year, the U.S. economy is set to slow as some of the effects of government spending cuts take hold. Still, the labor market is expected to continue healing this year, even after last month's disappointingly weak job gains.

The Indian economy is expected to remain subdued this year and any recovery will be gradual as government spending and interest rate cuts from the Reserve Bank of India revive domestic demand."

I am sure Gordon Chang is not happy with this kind of 'Predictions'.
According to his predictions, China should have collasped three times already.

台毒-害台灣 in reply to VSMumbai

PPP is a measure of domestic standard of living and internal economic strength in reference with that of the US where PPP / Market exchange rate = 1. But for comparison among other nations, PPP grossly inflates the strength of a developing or underdeveloped nation and does nothing good to that nation except may be that nation's ego.

In market exchange rate GDP, China is still behind the US in the next decade barring things unforeseen.

Unlike in the developed economies whose growth rate may be OK near 0% growth, China needs at least 7% growth or so to keep it going and India needs at least 5% growth or so to keep it going. It's comforting to know that both China and India are making the cut so far.


Governing a country is like maintaining a highly complex machine, Lawyers (professional liers, demogogues) are the last people you want running things.

Engineers actually understand the complexities objecetively and work to make sure the complex machine runs well.

Rolland Norman in reply to salpe

Yes, it is lots of corruption there which is not legalized to our
level yet. But, still in China they do not have a hedge fund manager
“earning” yearly $2 billion+ and paying only 15% of tax.

Have you been in China lately?
You may find exceptional achievements there no country on our
side attained yet… , this is not about tee-shirts only, this is about
advanced engineering, as well.

And by the way, please look how they can erect a 30 floor hotel in
just a few weeks:

nkab in reply to Michael Dunne

"Don't want to sound like Gordon Chang."
But you are already, aren’t you?
Believe it or not, and before you know it, China’s economy, in most aspects and in general, has doubled in size since 2008 when Beijing Olympic Games was the rage. China’s economy today is far more stable and resilient than it was only 5 years ago, with a lot more problems to solve naturally.
According to official data as of end of 2012, China has total public debt of about RMB 30+ trillion Yuan, or about 58% of GDP, of which RMB 10.7 trillion are local public debt. This (the local debt) is where the debates and the concern of credit agencies such as Moody. China’s foreign debts ($736.99 b as of end of 2012) and central government debts are not disputed.
Some central government officials think the local debts are under reported, but local government debts (the RMB 10.7 trillion Yuan) are unlikely to be more than doubling it to some RMB 20 trillion, making the debt percentage of GDP to about 77% under such assumption.
Well, suppose we don’t use the official data on debt, suppose we just assume China’s debt was 200% of GDP, it’s still “not the end of the world” for China IMO. That’s because China has the back up of asset of approximately RMB 25 t ($4 t), RMB 80 t ($12.8 t) and RMB 125 t ($20 t) respectively in the stock market, in housing real estate and in banking (BTW, China’s ICBC bank outranks each and all other enterprises in the latest Forbes’s World’s top 1,000, as the list's No. 1).
That, plus the huge “dividend” of bank saving of about RMB 100 t vs. a GDP of RMB 52 t (as opposed to, for example, of about $10 t saving vs. a GDP of $15 t in the case of USA), form a solid financial stabilizer and buffer to ensure debt security. That is, it would be quite secure and risk minimal even for the supposed “RMB 104 t” public debt assuming it being an improbable 200% of GDP of RMB 52 t.
The rumor-mongering of 198% is grossly and unrealistically overstated and is utterly useless for its objective whatever.
ps: BTW, slower growth rate of electricity supply is good news to all.
China has embarked ambitious programs across the board for several years now to reduce energy consumption per unit of GDP production. A slower growth in electricity is yet another proof that such programs are working and China is greener than 5 years ago, albeit it still has quite some ways to go.


I have to say, I am truly surprised by this article. Haven't read any news about China for at least 6 month, this article surely opened my eyes. I still vaguely remember that Economist have written a series of reports about China's INABILITY to transform the economy from a export-led model to a consumption-led model. Now, 55% of GDP comes from service? That's hell of a job for a country that size.

For those long time readers, you must remember Economist have said that the transformation would cause a crash! Well, time can really tell quality of an ill-informed magazine!

BTW, for those saying China are producing counterfeiting goods. You really need to adapt to the new fast-moving world, it is so last year. China are changing at every minute! The best Chinese firms are merging/buying US/EU firms like crazy this year, by the time you realize that, 80% of products will not only be made IN China but also made BY China.


Indeed it does not mean the end of the world, simply just another sign of the system failure affecting the whole global world.
We are still obsessed with the figures, statistics of constant quantitative growth, although the symptoms and scientific data is all around us that this kind of socio-economy is unsustainable.
Constant quantitative growth in a closed, and finite natural system is an illusion.
Multiple scientific sources explaining, proving today that we all exist, and part of a vast, interconnected, live natural system.
The laws of general balance and homeostasis, sustaining this system cannot allow processes going on that are against those laws.
The whole present human system, infrastructure is devoid of any natural foundations, it is fully artificial, based on bubbles and inflated, unnatural ideas, desires and products.
Whether we like it or not we are not controlling the system we exist in, either we adapt to its laws, or will keep on falling in deeper crisis situations.
We are simply in an evolutionary process, what seemingly worked before, now does not work since the conditions changed.
This is why all solutions based on our previous, present framework now fail, make things even worse.
If we want to climb out of this in a proactive, conscious manner, making the transition swift and softened we have to start changing, adapting as soon as possible.

forjustice in reply to salpe

Do you think you get true growth rate and unemployment figures from the governments in the west? You still must be stuck in cold war era mindset. Times have changed, the economic power has shifted to Asia. Bar for an insignificant period, economic center of power has always been in Asia through out history.


Most people in China have been calling for a 'slow down' - the economy has get to the stage where investment fed high growth over-produce / inflate the market, leading to inefficient investment and sometimes bad debt. The infrastructure building will not slow down but should be lead by NPV rather than state ambition.

I am optimistic on Chinese economy at least for another 10-15 years, so far the coastal area is developed but so much still to go for. It should be done less costly to environment and distributed less unfairly across society.

kommonsenses in reply to salpe

'But they are really world class in stealing western know-how'
I don't think you are being kosher here. and let me tell you who are the 'world class in stealing western know-how' --- in post ww2, it's japan.

it has stolen, copied and otherwise plagiarized most tech know how from the us thru the unsuspecting and generous us industry, including many tech transfer agreements from transistor radio, TV, to japns H2 rocket (based on delta launcher) to satellites (notably by Toshiba, Mitsubishi and NEC).

and if you want to go back 200 years --- it's the Netherlands who stole Chinese know how on china making that set the stage and had become the prelude to uk's industrial revolution.

I question your 'many years having been there in a management position in a 'very technical business' claim. just how many years? 1.1 years? and in what 'very tech business'? don't you know by standing sanction you are not allowed to deal 'very high tech business' with china?

please do not make a fool of your good self, by thinking all foreign investors who still pouring in tons of FDI in record amount into china (volkswagon has just announced to put in another 9.8 b euros there) are all stupid fools.


The two-trick (export of cheap stuff and domestic capital investment) pony show is running out of steam.

Any further economic expansion requires improvement of efficiency in capital markets, lower taxation, and lifting of state monopoly (from communication, to energy, to transportation) which is choking every sector. The state-owned banks alone account of more than half of the net income of all listed companies!

But don't worry, that is not about to happen. The bureaucrats are too busy accumulating wealth for their family to immigrate to the US or Canada before the party comes to an abrupt end.

kommonsenses in reply to guest-lelalio

Vietnam's economy (GDP) is less than 2% of China's. so the trade cannot be large. but something doesn't jive with your post. if you think the quality is bad, don't buy it. how come your import from china is still increasing.

@ powermeekat,

' only advantage China had so far: that is
dirt cheap labor.' my dear?

hate to break your heart, but china's FDI in 2012 increased by another notch, as many multinationals are opting to set up their R&D centers in china instead. china actually said NO to many low end manufacturing FDIs.

it's no good to bash like you are doing and making a fool of yourself.

engineer_sci in reply to ZGHerm

Indeed, to the womb and cocoon, the newborn and butterfly are buried corpses. The truly smart money is always looking to the big picture of system transition and not just to the retirement of the molting shell. To focus on trying to save the latter rather than joining the total process of the former, is there anything more foolish? -- Thank you for an excellent observation ZGHerm!



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