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Is China’s economy slowing down?

By Mich

Shanghai, China, 2010. Source: http://www.businessinsider.com/shanghai-1990-vs-2010-2010-6

Shanghai, China, 2010.

China has been an economic powerhouse for decades and a massive driver of growth and sources of investment around the world. However, as one of the world’s largest economies, it appears to be slowing as it matures.

There are a variety of signs and potential reasons. Trade tensions between China and the US are at least partially at fault. The US President has been adversarial toward China, and America isn’t the only foreign power that has its concerns. China’s human rights record has been less than stellar. Chinese President Xi Jinping recently moved into a lifetime post, which is a concerning development to say the least. While his plans for China are grand, the scale of his vision is alarming to outside powers. Its deadlines and ambitious growth targets seem to be fueling a slowdown instead of growth, though.

All the same, lifetime political terms make democratic nations nervous, with their overtones of dictatorship, and the Western world has long looked askance at China’s communist heritage. Their low currency valuation in relation to those of many developed nations drew manufacturing dollars across the ocean, and their low costs of labor and high population have maintained that supremacy, building a strong economic foundation for today’s wealth. Expansion efforts include the new Silk Road scheme to stimulate development and strengthen shipping ties across historic trade routes, particularly overland to Europe and the Middle East. However, competitors in Asia and large, developed nations across the world aren’t eager to see China’s rise. The arguments for other nations against supporting or permitting China’s growth are both ideological and economic, and will probably continue to prompt political maneuvering to slow its growth and dominance.

Pollution is a real challenge to China’s economy, and is getting in the way of ongoing business efforts, driving away those who have the financial resources and freedom to leave, and causing illness and unmanageable levels of hardship to those who remain. Despite the efforts of foreign nations to supply China’s energy needs, they are taking proactive steps to prepare for the future, cut energy costs, and reduce ongoing pollution by switching over to clean, renewable energy and improving regulatory compliance among manufacturers. This will likely slow growth in the short term but pay off in the long term, unless other factors come into play on a coinciding timeline. If other nations don’t put similar investment into renewable, low-cost domestic energy sources, then they may find themselves suddenly left in the dust as China surges into the utopian future.

Corruption has been a longtime enemy of China’s success, and the flow of money offshore is a significant concern and contributor to slowing growth. Chinese nationals’ investment in foreign real estate has grown to the extent that it’s influencing housing policy in cities around the world, including such hot spots as London, Vancouver and Sydney. Similarly, Chinese investment in foreign utilities, infrastructure and enterprise has grown to such a scale that multiple nations are moving to change regulation and put limitations on foreign ownership of domestic holdings, particularly those critical to the domestic wellbeing, security or economic stability.

The Chinese administration has also taken notice of this illicit flow of capital offshore, and is taking steps to respond. A recent anti-corruption campaign is cracking down on offenders. New, lower limitations on the sums permitted to leave the country is another step, and foreign powers are starting to collaborate with China to point the finger at offenders using creative approaches to moving money offshore. It’s become common for party members to use family members and employees, for instance, to get around the caps on taking funds outside the country.

As China continues to develop, it’s shifting sectors. The agrarian to manufacturing shift needs to tip over toward the stronger knowledge economy and service sector dominant in other developed nations. Workers expect higher levels of compensation as they eye the levels of wealth in other nations, and other countries with even lower relative currency valuations are stepping in to fill the gap in manufacturing, alongside the general trend toward automation.

Looking for ways to stay up to date? Pick your platform now to get share tips, breaking news coverage and expert projections. Change means opportunity for investors, and the ones with the most information and the best instincts could win big.

Investors worldwide will be keeping a close eye on China, particularly as it dances with the US over trade agreements and makes the shift into clean energy. The political climate, economic shifts and anti-corruption measures are sure to result in change, and the ones who guess right stand to profit in a big way.

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Filed Under: Market Analysis

About Mich

Mich is your typical middle class guy with a house and 2 kids minus the dog. He works in the IT industry and likes to muse about how to achieve more for less when it comes to money.

About Invest It Wisely

Invest It Wisely is about evaluating the choices that each of us face everyday. It’s about investing your time, your money, and your energy wisely, in order to achieve your goals. The end goal is maximizing your life expectation, and exploring the ways to get there.

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