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China's Volatile Growth

China's Volatile Growth

Posted on Wednesday, March 2, 2016

Michael Spence, Advisory Board Co-Chair of Asia Global Institute, says if volatility in China is managed correctly, moderate, sustainable growth is still possible. Written with Primavera Capital's Fred Hu.

Uncertainty about China's economic prospects is roiling global markets - not least because so many questions are so difficult to answer. In fact, China's trajectory has become almost impossible to anticipate, owing to the confusing - if not conflicting - signals being sent by policymakers.

In the real economy, the export-driven tradable sector is contracting, owing to weak foreign demand. Faced with slow growth in Europe and Japan, moderate growth in the United States, and serious challenges in developing countries (with the exception of India), the Chinese trade engine has lost much of its steam.

At the same time, however, rising domestic demand has kept China's growth rate relatively high - a feat that has been achieved without a substantial increase in household indebtedness. As private consumption has expanded, services have proliferated, generating employment for many. This is clear evidence of a healthy economic rebalancing.

This article first appeared in Project Syndicate on February 28, 2016.

The views expressed in this article are the author's own and do not necessarily reflect Asia Global Institute's editorial policy.

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