Is China's economy slowing down?

Posted by scapozzola on 05/08/2012

In 2011, the U.S. racked up a record $295 billion trade deficit with China.  That enormous trade gap has revealed itself not just in millions of U.S. jobs lost to China over the past decade, but in a drain on America's competitiveness in key high-tech industries, including solar panels.  In fact, between 2001 and 2010, the largest share of manufacturing jobs lost or displaced to China was in computer and electronic parts, a total of 909,400 jobs (32% of all jobs) lost.

With the U.S. buying far more from China than it sells back, it would be interesting to see a potential leveling-out of China's export prowess.  As the New York Times' Keith Bradsher reports, there may already be a slowdown underway in China.  Bradsher says that exporters throughout China "are struggling to maintain their global competitiveness."

Why exactly is China's economy hitting a rough patch?  According to Bradsher, falling export orders have coincided with "steeply rising wages and higher rents for factory space," which may push factories to the "brink of insolvency."

Other difficulties in China's export sector include a broader weakness in the economy.  Beijing has also "deliberately popped the country’s real estate bubble over the last year and is pushing apartment prices down sharply in an effort to make housing more affordable."

Bradsher does suggest that one further problem for China is a "weakness of export markets."  But that would indicate an inability of China's largest customer, the United States, to purchase so many Chinese goods.  Last year's record trade deficit makes that seem less likely.

Historically, Beijing has done whatever is needed to bolster its export economy, which begs the question of what new central government efforts might be used to boost a sagging economy.  Beijing has consistently undervalued its currency and allocated massive subsidies for its many state-owned enterprises.  Will more such moves be invoked to keep the Chinese economy running smoothly?  Or will a rough patch for Beijing present new opportunities for U.S. manufacturing?

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