No one has an answer as to whether China’s economy will keep chugging along and remain the engine of the world’s economy. I for one am very optimistic as to the country’s growth prospects.
With economic data consisting of mixed signals， it’s really a challenge to definitively know how China’s economy is really performing， and where it is headed.
First， for the not-so-positive news. Commodity prices are way down， new residential sales are on the decline and foreign investment is continuing to contract. All of these are significant issues for China.
But， there is more good news than not-so-positive news. Especially when compared to growth rates of the advanced economies in the North America and Europe， China’s economy has slowed， but is still chugging along at a very respectable pace. While America’s economy grew at a rate of 4.06% in the second quarter， and Europe’s growth rate was a paltry .8%， China’s economy grew at a 7.3% rate in the third quarter， and 7.5% in the second quarter.
Is there a reason to be concerned about this slight decline in China’s growth rate？ I don’t think so. I’m not alone in concluding that the decline in the growth rate was by design， one engineered in Beijing. But， it was implemented based on a new reality， one based on the unsustainability of recent historical double digit annual growth rates.
The fallout from the 2008 global financial crisis had an indelible impact on Beijing. The result is a new normal， that of a likely continuing era of sub-10% growth rates. This reduced growth rate has been hard for many of China’s leaders and citizens to accept. To a large extent， this reduced growth rate was designed in Beijing. China’s leadership continues to engineer a major change in the country’s economy， from one relied on an increasing exports， cheap credit and infrastructure investment to one based on an increasing consumer economy and growing middle class.
In a country of almost 1.4 billion， the need to generate an acceptable number of new jobs annually is a major challenge in China. A major challenge for Beijing and for the Chinese people is the willingness to live with slower growth as long as employment remains high.
Many in the West don’t understand how big a challenge creating this number of new jobs is， and it’s a major priority for Beijing. Adding ten million or more jobs annually， year after year， is something that Western economies have never had to deal with. In September， Prime Minister Li Keqiang indicated proudly that 10 million news jobs had been created during the first eight months of this year， a slight increase from the same period of 2013. Based on this job data， he indicated that he wouldn’t mind if the official target of a GDP growth rate of 7.5% wasn’t achieved.
While Prime Minister Li will likely be proven right， a growth rate above 7% for 2014 is impressive， especially when compared to growth rates in the rest of the world.
The real question is why China has not been given credit by many in the West for continuing to have one of the fastest growing economies in the world？ China has benefited from globalization and its integration into the world economy， so why do many in the West want China’s economy to fail？ I’ve concluded that the answer is simple. Many in the West don’t seem to understand that both China and Western economies can both thrive. Instead many see it from the perspective of “us versus them，” and conclude that for their country to grow， China’s economy has to decline. Unfortunately this is a very simplistic view， but one that too many in the West subscribe to. It’s easier for political leaders in the West to focus their population’s anger not on their own dysfunctional governments， but instead on the geographically distant China.
The resilience of the Chinese economy， the industriousness of the Chinese people coupled with the ability of the leadership in Beijing to take effective action will prove these naysayers in the West wrong.
（U.S. based Jeffrey Friedland is the author of “All Roads Lead to China，” a Roadmap to the World’s Fastest Growing Economy. ）