China braces for slower GDP growth

Workers assemble the children's bicycle wheels at the production line of Goodbaby Group Co., Ltd. on July 6, 2012 in Kunshan of Jiangsu Province, China.

Jeremy Hobson: Well for the past few years, China has had a much higher economic growth rates than we're seeing in the U.S. But when China releases its latest GDP figures tomorrow, forecasters are expecting the worst growth in three years.

Marketplace's Rob Schmitz reports from Shanghai.


Rob Schmitz: Economists are predicting China’s economy is growing at 7.6 percent -- not bad when compared to U.S. GDP, but it’s a stark departure from the not-so-long-ago "golden days" of double-digit growth in China.

Chinese Premier Wen Jiabao revealed this week his plan to get China out of this slump: Build. Steel mills, train lines, bridges…

Patrick Chovanec: Just the other day, Premier Wen came out and said ‘We really have to boost investment, because that’s the only thing that’s going to deliver the short-term GDP growth.'

Patrick Chovanec is an economist at Tsinghua University. He says Wen’s plan is a big mistake, because it focuses too much on the short-term.

Chovanec: Because you’re giving up, really, something that is much more important -- which is the long-term health of the Chinese economy -- just to hit a number.

Chovanec thinks China should instead lower taxes, invest more in health care, things that would put more money in the pockets of consumers.

But as Beijing reaches into its economic toolbox, what we’re seeing are projects like this one: Baosteel, China’s largest state-run steelmaker, will build a new $11 billion steel mill -- at a time when China’s steel capacity outstrips demand by 220 million tons.

In Shanghai, I’m Rob Schmitz, for Marketplace.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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