The figures are in, and China’s GDP growth in 2014 was 7.4 percent, below China’s official 7.5 percent target and a 0.3 percent drop from the previous year. The Wall Street Journal reports:
China’s economy…continued to face a housing glut, soaring debt and overcapacity in many industries, factors likely to erode growth in 2015. […]The results follow decades of growth that has hovered around 10%, one of the broadest, most rapid economic ascents in history that helped raise Chinese living standards and propel global growth and trade to new heights. Slipping economic momentum in China has had far-flung implications, squeezing Australian government budgets and Chilean copper mines that grew increasingly dependent on China’s ascent. […]Economists see the slowdown of 2014 as the prelude to an extended deceleration of growth. The often bullish International Monetary Fund on Monday forecast 6.8% growth for China in 2015, a number below the 7.0% target economists expect Beijing to set.
The reality is likely worse than the reports suggest, since China’s official economic numbers are consistently exaggerated.The new normal of decelerated growth will present plenty of challenges for the Chinese leadership. Xi Jinping seems to have foreseen this; as we have observed for some time, his massive party purge is in part an effort to batten down the hatches in anticipation of this socially destabilizing trend. His strategy, which is both smart and risky, is to consolidate power in his very innermost circle while pushing an old leftist agenda for citizens who might otherwise balk more at the new economic facts of life. So far, he has been successful, and has apparently built up enough power and enough leeway with the people to weather the oncoming storm.