Is China's 8% GDP growth goal too high?
Mar 5th 2009 7:00AM
Updated Dec 3rd 2009 10:41AM
The Chinese would not lie about their economic projections, but they might exaggerate. The central government claims that GDP in the world's most populous nation will grow at an eight percent rate this year, in large part due to a stimulus package that should aid industries across the country.
According to the Financial Times, the Chinese premier said, "As long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target."
But, what if China's economy is becoming more like the rest of the world's and stimulus does not take hold quickly? That is certainly the fear in the US, UK, the EU and Japan. Central banks and central government policies can only do so much to halt the credit crisis, unemployment and a downturn in business spending.
What China is not admitting is that its reliance on exports may make an eight percent GDP growth target unrealistic. If the economies in the West experience very deep recessions, China may have no place to sell its goods. That may cause layoffs among its middle class workers who have been large consumers of Chinese-made goods. The entire system for demand of China's production may falter.
While eight percent sounds good, the number is likely too high.
Douglas A. McIntyre is an editor at 24/7 Wall St.