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Why China’s slowdown matters

Why China’s slowdown matters

After a long period of stunning growth, China’s economy is now slowing.

The economy grew at an average rate of 10% a year for the three decades up to 2010.

It has slowed markedly. Last year, the Chinese economy grew 7.4%. The International Monetary Fund (IMF)’s most recent forecast is 6.8% for this year and 6.3% for 2016.

So why is this significant?

Why is China’s economy slowing?

The government wanted a slowdown, and has encouraged it because there are long-term forces that mean it was inevitable sooner or later.

Better, if possible, to have a gentle slowdown – called a “soft landing” – than a disruptive one.

More fully, China’s very fast economic growth was based on some factors that could not last forever.

Very high levels of investment have been part of the story.

Last year, the figure was 48% of economic activity, or gross domestic product (GDP), according to IMF data.

There are only a few other economies where the figure is so high.

Most are in the 15-30% range.

Investment is certainly essential for improving the capacity of the economy for the future.

High investment rates have been important factors in other Asian economic success stories.

Source: Why China’s slowdown matters – BBC News

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