Of all the fears discussed in the financial community these days, worries over China’s expansion loom large. The government in Beijing has revised down its growth expectations to 7% to 8% a year from the old, breakneck pace of 10% to 12%.
Private groups, such as the American Chamber of Commerce in China, have made similar downward adjustments in their expectations. Meanwhile, concerns about a burst Chinese real estate bubble cast doubt on even the reduced growth expectations, not the least because they call to mind America’s troubles of 2008-2009. Though there is good reason to anticipate a slowdown in the pace of Chinese growth, it would be a mistake to exaggerate the risks, and especially to do so by drawing easy parallels to America’s real estate debacle.
More fundamentally, growth should slow because Beijing has begun to shift from exports as its sole engine of economic expansion. Until recently, China had looked to exports alone to propel rapid rates of growth and employment, but the 2008-2009 collapse of world trade awakened Beijing to just how vulnerable such a strategy is. Europe’s slowdown and likely recession this year have driven that point home again.
Additionally, and still more fundamentally, China realizes that it can only push export growth so far. Over the last 20 years, the country has brought its share of global exports from next to nothing to a remarkable 12%. It would be unrealistic to expect that percentage to rise to 24% over the next 20 years.