News Column

China Slows Down: The Cohen Column

April 22, 2014

Isaac Cohen -- HispanicBusiness.com

chinese money
Chinese yuan notes (file image)

The latest figure of 7.4 percent economic growth in China for this year's first quarter, released last week, was slightly below the 7.5 percent target set by the government for 2014. At first glance, this figure should not be cause for concern.

However, other indicators are pointing to a slowdown in the Chinese economy.

For almost three decades, the external sector contributed to impressive performance of the Chinese economy, at double-digit growth rates.

In March, Chinese customs authorities revealed that exports fell by a surprising 6.6 percent. Additionally, imports -- mostly of inputs for processing industries -- fell even more, which brought down all imports by 11.3 percent.

Other domestic indicators of a slowdown are the result of credit restrictions imposed by China's central bank, which is reining in small and medium-size companies and the very dynamic real estate sector.

The fact that China is the world's second biggest economy raises concern about the impact its slowdown may have on the global economy, particularly on commodity prices.

As declared in Washington by the head of Chile's central bank, Rodrigo Vergara, quoted in The Wall Street Journal: "The main risk is China." The reason is that China is Chile's main trading partner.

Other exposed economies, because they are among the most successful exporters of commodities to China, are Argentina, Australia, Brazil and South Africa.

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Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Español TV and radio, and a former director, UNECLAC Washington Office.


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