Making sense of China’s ups and downs

Alisa Roth May 12, 2010
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Making sense of China’s ups and downs

Alisa Roth May 12, 2010
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Kai Ryssdal: Now that we all know more about Greece and Europe and their economic problems than we would care to, here’s a different but related question: What is going on in China? Yesterday we heard inflation there was up nearly 3 percent last quarter. Today it’s rumbles in the stock and housing markets. Property prices in Beijing have dropped 31 percent over just the past month. And a graph of the Shanghai composite stock index looks like a cutting-edge roller coaster.

Marketplace’s Alisa Roth has more.


Alisa Roth: It’s no surprise people get riled up over the news from China. Investors have been worried for ages that China’s economy’s over-heating, that there’s a bubble in its real estate market, that its stock market is going crazy.

Richard Drobnick is at the University of Southern California’s Marshall School of Business. And he says we’ve got good reason to worry about China.

Richard Drobnick: China has become the engine for the world economy. We should be very happy that Chinese economy is growing quite well.

He says the U.S. depends on China to buy our Treasury bonds, which helps keep interest rates low. China’s an important trading partner, too. And not just with us.

Drobnick: Our exports to China are important. But our exports to Indonesia and Malaysia are important, and those economies are stimulated by the Chinese economy.

The Chinese government’s well aware that it’s economy could overheat. It’s been taking all kinds of steps to keep the situation under control — tightening lending to slow growth and cooling down the housing market.

Victor Shih is a political scientist at Northwestern University. He says the ups and downs in the Chinese market’s nothing new. And he says in the short-term, things look pretty good.

Victor Shih: I think this year, the growth is set to be at a relatively high level. Consumption, at least according to the official figures, is growing at a pretty healthy clip and also export, actually, is picking up again.

He says in the longer-term, China does have some big challenges: It has to figure out how to make itself less dependent on exports and foreign investment.

I’m Alisa Roth for Marketplace.

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