China's Slowing Growth: Three Things to Know

With a slowing economy, China's continued growth will largely depend on Beijing's policy decisions, says CFR's Robert Kahn.

China's slowing growth carries risk for the global economy. Robert Kahn, CFR's senior fellow for international economics, highlights three things to know about the economic challenges now facing China.

- Global Repercussions: A Chinese economic slowdown could have global consequences. "The IMF has estimated that each percentage point decline in Chinese growth reduces global growth by about one-tenth of a percentage point," says Kahn. Effects from the slowdown can already be seen in lower commodity prices and weaker global markets, he adds.

- Transitioning to a New Growth Model: In order to rebalance the economy, China must figure out a way to shift away from an export-oriented economy toward one that encourages domestic consumption and is broadly based and environmentally sustainable. "A more market-based exchange rate and a range of other structural reforms opening markets to more competition, and gradually liberalizing the capital account will be essential," Kahn argues.

- Shadow Banking Risks Affect Transition: Non-traditional mechanisms of finance, like the shadow banking sector, introduce risk to the financial reform process. Shadow banking, "while still a small share of the overall market, could be the canary in the coal mine signaling a broader problem of non-performing loans," says Kahn. Therefore, reforms are likely to be gradual.

[Marclekin]

The gdp evaluates the value and quantity of goods produced in one country. For many years, China was underdevelopped, and could easily upgrade it's infrastructure and means of productions. But as they catch up, it is hard for them to sustain such a growth without major innovation. So yes, there economies will continue to slow until it reaches a much lower growth rate.

[outkid]

You cannot maintain double digit double digit GDP growth forever. It is historically unprecedented. That doesn't mean China's economy will go into recession or crash. 5%-7% growth would be very beneficial.

[jorgipogi]

It sounds like you are just promoting for china to be consumer instead of producers.

[klarion]

Well, that definitely wasn't an ad lib ;)

[DHARMIK_M]

just clearly looking from your eye brow and eye moment it seems you are reading from a monitor