China’s Economic Growth is Tapering Off – Or is It?
In the wake of the US-China trade war, the growth rate of China’s economy has slowed down considerably and is now growing at slowest rate since the economic crash of 2008-2009. Not only has the country’s stock market seen a big slump in recent months but the industrial output has also seen a big decline which places the Chinese leadership under even greater pressure to ensure that the trade wars between the two nations come to an end on amicable terms.
Astronomic Growth Year on Year
Since the economic crash of 2008, China has seen an impressive growth in its economy with the country’s GDP growing at 8.2 percent every year. This, compared with the growth rate of the United States at 1.4 percent and Europe at 0.4 percent, puts into perspective the sheer magnitude of economic growth China has seen in this decade.
This growth in part not only reflects China’s ability to bounce back from the financial crisis but the level of economic growth potential the country possessed. China was very quick to react to the economic situation of 2008, introducing revised economic policies which would reduce China’s dependence on foreign and imported products whilst promoting the consumption of locally manufactured products.
This, coupled with the decision to invest heavily in infrastructure ensured that the country remained on track for sustainable economic development despite the general economic climate globally.
US-China Trade Dispute to Blame?
Even though many assume that the US-China trade wars are predominantly responsible for the slowing down of the Chinese economy, the reality is that China was already forecasted to see a decrease in GDP growth this year, long before the trade wars even began; it was forecasted last year after the country’s GDP growth had slowed down to 6.8 percent, that this year would see a further decline to 6.5 percent.
This, in part, is due to the Chinese leadership looking for ways to attain a slow and sustainable form of economic growth (in contrast to the colossal growth the country has seen in the past decade, which of course is unsustainable in the long term).
The leadership has taken numerous steps against the lending boom of the past decade when the banks were lending big money to anyone who was looking for a business loan to promote business activities and small companies which would help industrialize and mobilize the economy.
Even though economists expected the Chinese economy to take a hit in light of the country’s recent economic reforms in a bid for more sustainable and steady growth, the downturn faced by the country from July all the way to the end of October this year is perhaps more jarring than many had foreseen.
The output growth of manufacturing facilities and factories slowed down from 6.8 percent to 6 percent while the growth in retail sales and industry output was much weaker than originally expected, very close to the lowest in the country in the last 14 years.
Looking at the Bigger Picture
Many economists believe that it is perfectly natural for a country seeing extraordinary growth figures in the past few decades to start seeing the tapering off effect once the growth rate of the country starts to catch up to the global economy, which of course it cannot outgrow.
Experts believe that the slowing down of China’s economy is both natural and welcomed since it is very easy to achieve tremendous growth in the early phases of an endeavor which gets increasingly difficult as you reach the point of saturation and start seeing the manifestation of the law of diminishing returns.
Additionally, it is unwise to be increasingly preoccupied by the country’s GDP growth rate alone since in reality, that only tells half the story and you’re really missing the big picture; in 2010 for example the country saw a GDP growth of 10% which correlated to an influx of $606 billion into the country’s economy.
Fast forward a few years to 2017 where the GDP growth was only 6% but actually resulted in an influx of $1,202 billion, double the amount of 2010. Remember when we said that fixating on GDP growth alone only paints half the picture?
More in Global
Rich People are Getting Wealthier During the COVID-19
Many of America’s wealthiest people have overcome the stock market’s crash that happened in March 2020. Thirty-four billionaires of America watched...May 4, 2020
Why It’s Important to Review Your Plans After Retirement
Now that you have retired, you need to ask yourself some vital questions. These questions sort of help you examine your...April 29, 2020
Amazon Steals Project Runway’s Award-winning Hosts Heidi Klum and Tim Gunn with a Very Lucrative Deal
Project Runway is about to lose its award-winning judging duo, Tim Gunn and Heidi Klum. And guess who’s poaching the show’s...April 29, 2020
They Dropped out of College But That Didn’t Stop Them from Conquering the World
Is that college degree all that necessary? You must have thought about it – dropping out of college. Aren’t there billionaires...April 29, 2020
Finance Forecast: Here’s What Investors Can Expect in The Coming Year’s Economy & Global Market State
According to predictions, stocks may reach record highs as 2019 draws to a close. However, Wall Street has already begun issuing warnings...April 28, 2020
This Is The Simple Yet Revealing Question Tesla CEO Elon Musk Asks Applicants to Catch Those Who Bluff During Interviews
Being a hands-on business owner comes with a lot of responsibilities. This includes picking the right people to bring on board...April 28, 2020
The Shocking Reason Why Some People Never Retire
Changing Trends In recent times, it has become commonplace for baby boomers to keep working even into their 80s. Different reasons...April 28, 2020
eMerge Americas Lines up Promising Startups to Pitch to Potential Investors Like Pitbull
There’s no debating that Silicon Valley remains the leading hub for tech startups in the world. The entrepreneurial energy in the...April 28, 2020
How to Prepare for an Unexpected Early Retirement
One of the reasons why people work so hard is so that when they retire, they would have enough money to...April 28, 2020