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Global Markets Brace For China's Slowing Economy
Originally published on Thu July 12, 2012 6:10 pm
MELISSA BLOCK, HOST:
Global stock markets are anxiously awaiting new figures from China. Analysts are expecting the numbers to show the world's second largest economy suffering its biggest slowdown since the global financial crisis.
NPR's Louisa Lim is in Beijing.
LOUISA LIM, BYLINE: A hundred million tons of iron ore sit in China's ports waiting for buyers. In central Beijing, cranes stand unused and work has stopped on countless building sites around the country. Prices are dropping in ever more categories of goods. China's once unstoppable economy is unmistakably slowing. The question is, just how fast?
For three decades, China's economy grew about 10 percent a year, but those boom years are officially over, according to Yu Bin, an economist working for the state council.
YU BIN: (Through translator) We believe that China's economic growth may expect a slowdown of 20 to 30 percent. In the coming 10 years, China's growth rate may stabilize at seven to eight percent.
LIM: Last quarter, China's economy grew 8.1 percent, a nearly three year low. Tomorrow's figures will be worse, but Yu Bin says a recovery is likely in the second half of this year. Beijing's already cut interest rates twice in a month, sparking fears the economic slowdown is worse than expected.
REN XIANFENG: I'm very reluctant to say it's a hard landing, but I think it's fair to say it's quite close to a hard landing.
LIM: Ren Xianfeng is a senior China economist at IHS Global Insight. She fears Beijing's moves to stimulate growth by injecting money in public works may end up causing problems.
XIANFENG: So, normally, when they front load investment, they probably will also be backloading problems, just like what has happened over the past couple of years. They front loaded (unintelligible) in 2009 and 2010. We started seeing a lot problem with the property market, with local government debt and with the bank sector distress, all those issues have started springing up.
LIM: But China's premier, Wen Jiabao, underlined this week that sustaining investment is key. Later this year, he'll hand power over to a younger generation of leaders. For that, the party is likely to build short term stability, whatever the long term cost.
Louisa Lim, NPR News, Beijing. Transcript provided by NPR, Copyright NPR.