As China Economy Growth Slows, U.S. Strengthens Grip as Top Economy

CNNMoney reports that:

“The data reinforce our view that growth is on a downtrend and we continue to expect GDP growth to slow [in 2014],” Nomura economists wrote in a research note.

At the same time, MarketWatch reports that:

Consider the new forecast by top economists at the nation’s leading bank firms. They predicting the U.S. economy will hit 3% growth in 2014 for the first time in nine years.

The gulf between the two increases remains relatively large, but there are chances America’s growth rate will improve in the next few years and China’s will falter.

China’s struggle with high levels of debt, particularly at the local government level, has worsened. The figure has reached nearly $3 trillion. Should the central government decide it has to bring that level down, and possibly force a series of write-offs of bad loans, one of the engines of China’s growth, which has been local government spending on infrastructure growth, will be badly hampered.

Among a lengthening list of China’s other growth-restricting problems are tremendous air and water pollution, as well as the increase in wages among its large industrial workforce. As pollution has become a massive health hazard, China’s manufacturing expansion may have to be temporarily capped. Labor costs have encouraged global manufacturers to look at locating in other nations, like Mexico.

In the meantime, in the United States, the Federal Reserve’s monetary policies continue to help the economy. It is open to speculation when these polices will end. What is not open to suggestion is that some level of bond buying will stay in place until well into 2014. That will fuel an ongoing recovery of residential real estate, a major component of the net worth of Americans. That coupled with a drop in the jobless rate, and consumers spending should recover quickly.

China’s move into the first place among the world’s nations based on GDP may have to be pushed out several years, or several decades. If some of the challenges to it growth increase rise, China may not get there at all.