China Slowing Down

Bloomberg reports the economic growth of China has slowed dramatically. We've been predicting this outcome for at least a couple of years, expecting China to experience the same economic malaise that Japan has endured for 2-3 decades now.

Most people around the world still seem to believe China’s ascent is relentless and inevitable.

Statistics tell a different story. snip) In fact, the entire Chinese export machine is sputtering. Between 2006 and 2011, China’s total merchandise exports nearly doubled, powering the country through the Great Recession. Since then, they’ve increased less than 11 percent, according to World Trade Organization data.

In part, China is simply running into the difficult transition every country faces when losing its low-cost advantage. Facing stiff competition from countries like India and Vietnam, where wages are lower, China is losing ground in apparel and textile exports to the United States. Meanwhile, the Chinese economy isn’t replacing these traditional exports with new, high-value ones quickly enough.

As the author notes, Chinese government 'fiddling' with their economy, a lingering reluctance to trust the markets, is an even bigger problem. It plagues governments with socialist roots and crony capitalism tendencies.