It is hard to understand what is happening with the Chinese economy. The central government says that GDP grew almost 7% in the fourth quarter. At the same time, it admits that 20 million migrant workers left the city to return to rural areas. That equates to 15% of the entire migrant population in the world’s most populous country being out of work.
China’s export rate is slowing as the economies of the west fall into recession. It is hard to see how that will not drive up unemployment further.
The IMF and other organizations from outside China still believe that GDP in the nation can move up by 5% this year. It is hard to see how the number could be that good since the world is moving toward an unprecedented economic disaster.
Bloomberg recently reported that more than 4,000 toy companies closed in China last year. The news service says that “Toy exports rose 1.8 percent in 2008, 18.5 percentage points less than the gain in 2007.” In other words, in 2009, the growth of this part of the Chinese economy seems to be heading into a contraction, and perhaps a sharp one.
The International Trade Centre lists toys as China’s fourth largest export. Furniture and electrical equipment are higher up the list. None of those categories is immune from a recession. It may be that toys, because they are relatively inexpensive, will outperform the other two industries.
There is a great danger in using anecdotal data about economic trends to form opinions, unless that data points mostly in the same direction.
Toy sales would seem to be an insignificant indicator of China’s economic health. How could something so small be so big?
Douglas A. McIntyre
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