China Starts To Get Nervous

China has the same access to World Bank and IMF financial forecasts as any other nation. Now the the Internet has made nearly even document in the world accessible. The Communist central government can even read predictions in the CIA Factbook.

In the last two weeks, it has become clear the the global economy is failing at the much greater rate than it was at the beginning of the year. What is worse is that the declines could accelerate even more.

The Chinese are beginning to talk about their economic situation in public, which is something of a departure from tradition. They may want to let the developed nations know that the poor management of their banks and financial systems has begun to bite elsewhere. It is a combination of “I told you so” and blame the corrupt and undisciplined free market system.

According to the AP, “Premier Wen Jiabao warned that the impact of the global financial crisis was still spreading in China and the country faces the long and arduous task of combating its effects. ” There are almost no forecasts that predict the world’s most populous nation will enter a period of economic contraction, but GDP growth might fall to 5% this year and next, well below the 10% growth pace of the last several years.

Or, the Chinese may not be that lucky. One of the most odd and unsupportable theories regarding how the global recession will play out is that China, India, and other “fast growing” nations will lead the world out of economic contraction. Since China is a net exporter of goods, it is hard to see how a nation that relies on sending products abroad would not lag the global economy.

If China’s balance of trade begins to move against it, the county’s growth could suffer the same fate as the US, UK, Japan, and EU.

Douglas A. McIntyre