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Economists predict slower growth for China

Eight-year-old Chinese girl Zhang Huimin (R), rides an electrical dinosaur in a KFC restaurant in Baoding of Hebei Province, China.

Economists expect China's third-quarter GDP growth to slip to 7.4 percent; amazing by U.S. standards, but not for a country that’s been used to near-double digit growth for years. Some economists aren’t buying the 7.4 percent figure, either. “It doesn’t seem to match up with what I see going on,” says Tsinghua University economist Patrick Chovanec.

Chovanec thinks China’s actual GDP growth is around four percent. Steel output is down, power consumption is lagging, and the EU crisis has hurt trade to China’s biggest export market. Chovanec says China’s economic formula of exports plus infrastructure investment isn’t working anymore, and that’s taken a toll on many foreign companies. "If you’re Australia selling iron ore, or say, Caterpillar selling construction equipment, then you’re going to get hit really hard in this leveling off and decline in investment,” says Chovanec.

Yet, for the Apples, the GMs and the KFCs out there, China is still a very attractive market. Consumption has tapered off a little, but as China moves toward a consumer-led economy, retailers will continue to see growth.

Rob Schmitz: Economists expect China’s 3rd quarter GDP growth to slip to 7.4%--amazing by US standards, but not for a country that’s been used to near-double digit growth for years. And some economists aren’t buying the 7.4% figure, either.

 

Patrick Chovanec: “It doesn’t seem to match up with what I see going on.”

 Tsinghua University economist Patrick Chovanec thinks China’s actual GDP growth is around four percent. Steel output is down, power consumption is lagging, and the EU crisis has hurt trade to China’s biggest export market. Chovanec says China’s economic formula of exports plus infrastructure investment isn’t working anymore, and that’s taken a toll on many foreign companies.

Patrick Chovanec: "If you’re Australia selling iron ore, or say, Caterpillar selling construction equipment, then you’re going to get hit really hard in this decline in investment.”

But for the Apples, the GMs and the KFCs out there, China is still a very attractive market. Consumption has tapered off a little but as China moves toward a consumer-led economy, retailers will continue to see growth.

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

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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