How will Chinas economic growth be affected by the current turbulence in global financial markets?
The Chinese economy will experience some cyclical swings; for instance in the near-term, problems with the global economy will see China’s own economic growth fall behind that of the last few years. We also see signs of overheating and inflation in the market. China’s consumer price index reached an 11-year high of over eight per cent in the first quarter. This is a clear sign that China in the near term has some inflationary problems and this will call for more tightening measures during 2008. China will continue to keep its credit policy tight through measures such as raising foreign reserves and curbs on bank lending. At the same time, the economy is also facing the potential of external shocks to its growth because its integration with the global economy is deeper than it was a few years ago. Exports make up 36 per cent of GDP in gross terms, and eight per cent in net terms, so the US recession and the slowdown in the EU and Japan will inevitably slow export growth and hit China’s
