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China's Economy Slows To 3-Year Low

Jul 13, 2012
Originally published on July 13, 2012 11:04 am



This is MORNING EDITION from NPR News. I'm Renée Montagne.


And I'm Steve Inskeep. Good morning. China's economic growth has slowed down to a three-year low. That's according to new figures released today. The numbers matter to us because of the way the world economy is so interconnected. Americans import a lot from China, sure, but have also been working to boost exports to other nations, including China.

NPR's Louisa Lim joins us from Beijing to make sense of the latest news. Hi, Louisa.

LOUISA LIM, BYLINE: Good morning, Steve.

INSKEEP: So we say slowed to a three-year low. I gather it's still growing, is that right, in China?

LIM: Yeah, that's right. I mean, the figures that we had today showed that China's economy grew by 7.6 percent in the second quarter of the year, compared to the same time last year. So for China that's not very good. China's used to three decades of double-digit growth and this is the slowest growth since 2009.

But, actually, stock markets today rose after hearing the figures. There was, as one analyst put it, a collective sigh of relief because they had been expecting bad figures and these were seen as not disastrous. Of course, many other countries would kill for 7.6 percent economic growth and China's head statistician when he was actually introducing the numbers today, he put it in context and he said that 7.6 percent was good enough compared to the rest of the world.

INSKEEP: OK. Compared to the rest of the world, but China has always had its own standards for this sort of thing. What is it that has made authorities so nervous about the possibility that China might not have spectacular growth, that even OK growth might be something that would worry them?

LIM: Well, for China for many years the magic figure was seen as eight percent growth in order to create enough jobs to have stability. And so this quarter we have the seen the GDP figures dipping below that magic figure of eight. So whenever that happens people do get nervous, even though it might look big in comparison to other countries.

For China's leaders it's, of course, a concern.

INSKEEP: You know, I have to ask because there was this concern, as you mentioned, that growth would be considerably worse than it is now reported to be. Do outside experts believe the numbers they're being given by the Chinese government?

LIM: Well, that is a good question. There is always a suspicion that Chinese economic numbers have been fiddled, and often analysts are looking at other figures to judge economic activity - proxy figures like electricity usage. And this year there are even fears that some of those proxy figures could be manipulated.

One reason is, if you look at, particularly, the growth in electricity usage in May, that actually grew, but at the same time, we were seeing record coal stockpiles piling up around China. And if you're expecting people to be using electricity you wouldn't expect to see coal stockpiles. So there is a fear among analysts, particularly, that the figures are actually worse than the government is letting on.

And I have to say that's a skepticism about official figures that is even shared among some of the highest government leaders. Even Li Keqiang, the man who's set to take over as premier later this year, in the past he's expressed doubts about official statistics and he once said they were for reference only.


LIM: So that means they weren't worth very much.

INSKEEP: For reference only? What does that mean?

LIM: Well, I mean, maybe it's a sign that the figures are more what the government would like to see happen rather than what's actually happening at the moment.


INSKEEP: OK. So economic growth is seven-point-something percent or not. We know this much if we know anything. And this is all happening as China prepares for a leadership transition this fall. What's the connection between the economy and that transition?

LIM: Well, the connection is that, as this transition happens - it only happens once a decade - and the ultimate priority at this moment in time is stability. So, of course, China's leaders will do everything they can to make sure the system is stable. They won't want to see job losses which could lead to instability. So there are many analysts that believe the government is less likely to take those difficult steps, right now, when stability is the priority.

So there is a very clear linkage.

INSKEEP: NPR's Louisa Lim is in Beijing. Thanks very much.

LIM: Thank you, Steve. Transcript provided by NPR, Copyright NPR.