China Slows Down

By Isaac Cohen*

The latest figure of 7.4 economic growth in China for this year’s first quarter, released last week, was slightly below the 7.5 percent target set by the government for 2014. Therefore, at first glance, this figure should not be cause for concern.

However, other indicators are pointing to a slowdown in the Chinese economy. For almost three decades, the external sector contributed to impressive performance of the Chinese economy, at double digit growth rates. In March, Chinese customs authorities revealed exports fell by a surprising 6.6 percent. Additionally, imports mostly of inputs for processing industries fell even more, which brought down all imports by 11.3 percent.

Other domestic indicators of a slowdown are the result of credit restrictions imposed by China’s central bank, which are reigning in small and medium sized companies and the very dynamic real estate sector.

The fact that China is the second biggest world economy raises concern about the impact its slowdown may have on the global economy, particularly on commodity prices. As declared in Washington by the head of Chile’s central bank Rodrigo Vergara, quoted in The Wall Street Journal, “the main risk is China,” and the reason is China is Chile’s main trading partner. Other exposed economies, because they are among the most successful exporters of commodities to China, are Argentina, Australia, Brazil and South Africa.

*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.


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