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China’s economic growth has slowed in the last 10 years. It is, however, still above six per cent, a dream for many countries.
Some could blame it on the US tariffs. But the slowdown started long before President Donald Trump instituted new tariffs or upped the old ones to reduce the trade imbalance, with China enjoying a huge surplus.
Economists usually see tariffs as an old-fashioned way of resolving trade disputes. In the long run, everyone loses because of the subdued trade.
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Less talked about in this trade dispute with America is the money China lends the world’s most powerful country through treasury bonds.
It seems China makes money through trade with the US, then lends back the same money! Back to the slowdown in the Chinese economy. Should we lose sleep over it? I think not.
For one, economic growth has limits, just like our own growth. We grow faster in our childhood, teens and young adulthood then we slow down as we age.
Economies behave the same. The slowdown in the Chinese economy probably means it has now matured.
Developing country
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My previous visits to Shanghai and Beijing seem to support that. China looks more of a developed country than a developing country. Manufacturing, which is the backbone of the Chinese economy, also has limits to growth unless there are major innovations like the Internet or computers which changed the industry.
The bright spot here is artificial intelligence and the fourth industrial revolution in which China has become a global player.
Could we see a surge in Chinese economic growth in the next few years when fruits of artificial intelligence finally ripen, so to speak?
Data also show that China has become an innovation powerhouse going by the number of patents registered annually.
China’s economic growth could also be buoyed by a shift from investment to consumption. Economic growth has raised millions from poverty to the middle class. This group could keep the economy abuzz with their demand for goods and services.
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Could the slowdown be resulting from shifting resources to other parts of the world where long term returns are higher?
Think of the standard gauge railway (SGR) and one belt one road initiative. Is this slow down an “investment” in the future?
Others point out the rising cost of labour as the source of slow down. As more Chinese shifted from poverty, the pool of “cheap” workers reduced raising the wages.
Unlike the US, which can keep wages low by getting immigrants, China has few immigrants except from the rural areas. Remember labour is one is the costliest factors of production.
New competitors like Vietnam and the surrounding nations could be taking some wind from the Chinese economic sail.
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They could be enjoying lower labour costs and other advantages like government incentives and no legacy technologies.
Could complacency be a factor too, the tumefika (we’ve arrived) feeling?
After zooming past Japan to become the world’s second-biggest economy and on the verge of overtaking the US, it’s possible that the Chinese have slackened.
This stream of thought would be good fodder for behavioural economists. Our worry should be based on less demand for our goods and services if the Chinese economy slows.
If China buys less of our goods, the trade deficit will become bigger to our disadvantage. That will be felt in fewer jobs and we could add in repayment of our loans.
Could Chinese loans become more expensive to cater for this slowdown? The world economies are intertwined. The slowdown in China could affect countries we trade with.
If a country imports some raw materials from Kenya and exports the products to China, less demand for the products in China would mean less demand for our raw materials.
Would a slowdown make China more inward-looking and focus on her internal problems which are now deflected by global expansion?
Some reckon an economically weakened China would be tempted to be adventurous and lead to military build-up.
So far, despite a few disputes with her neighbours over islands and sea borders, China has not used her economic power irresponsibly.
China has matured economically and the slowdown will reach a plateau and stabilise as is the case with developed countries.
Maybe we should be asking which country will take the economic growth mantle after China. Could it be India? China‘s growth will not stop, it will only slow down.
This slowdown will not stop China from becoming the world’s leading economy soon.
It’s her imminent economic leadership that may have rattled the west which is used to dominance since the Romans and the Vikings. The world should now worry over a mature economy, the same way we worry over our grown-up children.
America’s economic growth took decades giving us time to adjust; we never had that luxury for China. She grew too fast.
The other worry is that we do not really understand China. Beyond Mandarin, we have no courses on the Chinese economy, civilisation, and thoughts.
Economic power
The worry over China should be that the Asian economic giant has become hard to understand. Her enigmatic nature such as mixing market economy and communism has made many fear her next move.
The best way to deal with China’s new economic status as a mature economy is by understanding her not fearing her.
How many Sinologists do we have in Kenya? The dominance of the Chinese economy is now a reality we must live with.
Western countries confronted the rise of China’s economic dominance by investing there.
We prefer to spectate and talk about it. Another reason not to fear China’s economic maturity is that the memories of her own economic suffering as she rose from the rubbles of her civil war are still fresh.
Do you still fear China? My suggestion is to visit the place first.
-The writer teaches at the University of Nairobi
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