China’s growth rate for the third quarter ended 30th Sept 2011 was at 9.1% and the unemployment rate in US also stood, coincidentally, at 9.1%. Call it a quirk of life or meaningless statistics but there is no denying the way things currently stands at two ends of the globe. It is a stark reminder of the situation in two of the biggest economies of the world.
According to The Associated Press' latest quarterly Global Economy Tracker, in the quarter April to June 2011, China was the fastest growing economy in the world and only Argentina, which can hold no lamp to the sheer size of China, grew at 9.5%. The U.S. economy grew at a 1.3% in the April-June quarter, before expanding 2.5% in the July-September period.
But the heat of keeping up with the fast paced growth seems to be catching up with China. According to the China Federation of Logistics and Purchasing (CFLP) which compiles the index on behalf of the National Bureau of Statistics, China's official PMI recorded its lowest reading since February 2009, coming in at 50.4 for October compared with September's 51.2.
What does this mean? Is China slowing down or more importantly, can the world afford to have a slowing Chinese economy when it is on the verge of recovery? Analysts in China are of the opinion, not surprisingly, that this slowdown is just a ‘seasonal’ factor. Europe is China’s biggest market and when that entire region is sluggish, naturally, China is taking some hit. Being mainly an export driven economy, unlike India’s domestic driven, Chinese new export orders for Oct dropped to 48.6 from 50.9. But with Europe not expected to bounce back immediately, the sluggish growth for China on the export front and thus the economy cannot be ruled out. The humorous part is that many are predicting a “soft landing’ for China at 9.1%. So where does that put the rest of the world - “hard hitting landing”?
There are many who question the veracity of the Chinese economic data. With so much control over all information, doubts are raised time and again about the information itself being meted out. Transparency is a bad word in China and human resource simply means hands which produce goods. Despite all this, China continues to draw one and all like a magnet. Everyone worth their name in salt has set up shop in China or has outsourced manufacturing to China. Every single piece of data which comes out is dissected and debated and usually, makes it to the front page of every business newspaper around the world. Is it the draw of its US$3.3 trillion forex reserve, the sheer panache with which it delivered the Beijing Olympics or its infrastructure wonders like Three Gorges Dam, the world's highest railway line to Lhasa, the Beijing-Shanghai high-speed rail link; the list is endless. Did you know that five of the world's top 10 contractors, in terms of revenue, are now Chinese?
Thus if we look at this logically, we cannot ignore China as it looms large over the globe today simply because it so humungous; towering like the Mt. Everest. Like mountaineers vying to climb the Everest, with unpredictability threatening at every step despite years of experience, China too is an enigma. No one, not even the best brains at Goldman or Moody’s or GE or Apple, are able to lay a finger on the exact working of its development model. Forming alliances with some of the most dangerous and authoritarian countries in the world, while signing the dotted lines with developed countries, one cannot really fathom what really lies beneath.
Coming to the basic question – can the world today cope with a ‘soft landing’ China? Well, it will hurt; there is no beating around the bush there. If the fastest growing economy slows down, which are like wheels of an automobile, naturally, if one or two wheels develop a puncture, slowdown is certain. A few years ago, one could have never ever imagined China becoming what it is today. But that is how the changed equation of the global economies stands today.
Seen the disaster movie ‘2012’ where the world comes to an end? That movie to a large extent depicts the global scenario – it was an Indian scientist at NASA who predicts the end of the world but it is China which is assigned the task by USA to build a huge structure which will withstand the disaster and thus save a few human beings after the entire earth is destroyed. One can shrug this off as movie fiction but it is the perception which is a learning. Thus that’s the way things stand – India can be the grey cells to the world but it will neither earn enough moolah nor will it help save the world. But it is China which the rest of the world thinks is capable enough to build infrastructure of mammoth proportions. Huge and strong enough to save the world. “Made in China” anyone?
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