The World Will Feel China’s Economic Pain

China’s economy growth rates, at 6.8% for its fourth-quarter, are reason for alarm. From The Telegraph:

The latest figures show that China’s juggernaut is slowing down and perhaps even grinding to a halt. Its economy expanded by 6.8 per cent last year, compared with 13 per cent in 2007. For those of us enduring outright recession, possessing an economy that grew at all, let alone by nearly 7 per cent, hardly seems a cause for alarm. But China’s vast population of
1.2 billion ensures that tens of millions of people enter the workforce every year, while colossal numbers migrate from the impoverished countryside to the cities of the eastern seaboard. Providing these rootless masses with jobs and homes means that China must run simply to stand still. In effect, a growth rate of 6.8 per cent leaves China perilously close to outright recession.

Other indicators suggest this extraordinary juncture may already have arrived. Electricity output in the final quarter of last year was 6 per cent lower than in the same period of 2007. Previously, power generation had expanded by an annual average of 15 per cent. Like the rest of us, China is suffering from a collapse of consumer demand in its key export markets and the crisis of global finance. If its breakneck expansion comes to a juddering halt, the possible consequences could scarcely be of greater moment. Within China, stability and national unity under the Communist Party’s iron rule rest upon economic success. Mass unemployment and poverty might eventually threaten this political compact. Economic failure would risk upheaval on an extraordinary scale – a spectre that haunts China’s leaders who bitterly remember two centuries of turmoil before the onset of Mr Deng’s reforms in 1979.

George Wehrfritz of Newsweek writes that the numbers may be even more grim than we think.

China tabulates growth figures on a year-on-year basis, meaning that last quarter’s output was 6.8 percent larger than over the final quarter of 2007. Yet in the world’s two largest economies, the United States and Japan, growth is tallied sequentially by comparing one quarter’s growth with that of the previous quarter. And by that measure, China’s numbers fall hard. In sequential terms, Goldman Sachs calculates that China’s economy expanded by just 2.6 percent in the last three months of 2008, and according to Morgan Stanley’s math it actually shrank by 0.5 percent.

Meanwhile, economic news coverage in China encompasses a spectrum of viewpoints; some newspapers are praising the figures, noting growth in a time of a global economic recession, while others take a decidedly more cautious approach. From Danwei:

The majority of papers led with some variation on the neutral headline “Last year’s GDP grew 9%”. Some chose to highlight absolute figures, as in the Beijing Morning Post’s declaration, “Last year’s GDP broke 30 trillion,” while others took more of a local focus, as in the Chinese Business View’s reporting of the numbers for Shaanxi Province: “15.6%: Seven years of continuous high growth for the provincial GDP.”

On the negative side of things, the Southern Metropolis Daily and The Beijing News noted that 9% was a seven-year low for GDP growth.