Is a slowdown in China’s growth the key to reform?

Many were caught flat-footed when China’s Premier Wen Jiabao lowered the nation’s GDP estimates by .5 percent and even more expressed great concern. But Michael Shuman argues in Time magazine not only is a slowdown inevitable, it might not be a bad thing.

“As a major  commodities importer, a slower China would likely mean lower prices for oil, iron ore, copper and other raw materials, dampening growth in many emerging markets,” he concedes, but adds that most economists “believe that China’s growth rates over the next 20 years or so will not match those of the previous 20 years. And just about everybody also agrees that a slower Chinese economy would likely be a healthier one.”

But getting to a “healthier” economy will be difficult given China’s political system and demographic challenges.

As Kevin Yau notes in a Reuters article, China’s “unbridled growth is making it hard to rebalance an economy that, while the world’s second-largest, has become worryingly dependent on exports and foreign investment – vulnerable to such vagaries as the European debt crisis and subpar U.S. consumption.”

“But reining in and transforming the economy is particularly difficult in a one-party system where posting impressive growth numbers has been the only sure-fire way to achieve political promotion through the Communist Party ranks,” he adds.

 

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