Allister Heath

The great downhill bicycle ride

Allister Heath on the Chinese economic slowdown

A little over a year ago, when it was already obvious to virtually everybody that the boom was over, the City’s Panglossian crowd came up with one last, seemingly profound, argument to allow them to continue to deny reality. Going by the ugly name of ‘decoupling’, the theory was that the emerging economies were no longer reliant on exports to the West. America and Europe could plunge into recession, the argument went, but Indian and especially Chinese consumers would take over, allowing their economies to shrug off the West’s downturn.

Like assumptions underpinning the boom years, this one has since been found wanting. With the British economy shrinking, much of Europe performing little better and America in a deep funk, demand for imported consumer goods is declining. With the global construction industry in crisis, demand for Chinese steel is also falling off a cliff. Japan, another of China’s top markets, is back in the doldrums.

No wonder, then, that China’s annual export growth has slowed to 10 per cent, from 22 per cent a year ago. Brazil, Russia and the Middle East are still sucking in Chinese goods but other markets are drying up. The most recent official GDP figures claim the economy still grew at an annual rate of 9 per cent, down from 10.1 per cent, though this is no cause for celebration. Official figures mean little; come hell or high water, Chinese GDP always seems to grow in a range of 9 to 12 per cent.

More reliable indicators confirm China is slowing sharply. The Baltic Dry Index, a gauge of the cost of freight shipping, is down by four fifths; with exported goods accounting for 36 per cent of China’s GDP, this is not good news.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in