http://money.cnn.com/2015/10/09/news/economy/china-lagarde-imf/index.html?iid=SF_LN
The world economy had slower growth but did not blame this on China for their lack of growth. Christine LaGarde of the IMF says that the slowdown was expected and is healthy because China cannot continue to grow at a such high rates as they have in the past. Their growth was previously driven by building roads railroads and housing but they are transitioning to growth based off consumer spending. Their population is not growing as quickly so they cannot continue to build. They need to slow down there and grow in other areas. China has a growth rate target of 7% this year which is sill very high but lower than the days of 10% growth. The IMF expects growth of 6.8 % and 6.3% in 2015 and 2016 respectively.
3 comments:
This makes sense. Growth rates were booming in China in the recent past, but it is just not possible to have a 10% growth rate forever because business cycles. With the stock market crash earlier this year and the population growing slower, a 7% growth rate is very acceptable. China is trying to do a couple things with its government such as taking more of a leadership role in the global economy and growth rates are effects of the actions China is taking for their new role.
I agree that the recent economic downturn in China is partially due to the fact that they are in the midst of a low point in their business cycle. Although it is seeming to hurt the global economy, it is also true that growth in China needed to be stunted. The target growth rate seems plausible and reasonable for both China and the global economy.
China's growth decline makes sense. As countries industrialize they tend to have higher growth rates, and if they don't plan to grow in other ways they will experience a sharp crash once they are done industrializing. Now china needs to start focusing on more sustainable growth measures. Building roads and buildings is great, but it only creates growth for a short time. How sustainable China can make its growth will determine how it progresses as a country in the future.
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