China contributes most to global economic growth
Source: People Daily
China’s economic growth rate in 2006 was 10.7%. China has contributed more than any other country to global economic growth since 2000. It is expected that this year the growth rate will fall back to 9.9%, but it will still have a great impact on the Asia-Pacific Region, according to the UN Economic and Social Survey of Asia and the Pacific 2007.
George Pratt Shultz, an economist for the UN Economic and Social Commission in Asia and the Pacific said recently that China has a great influence on the world economy. If one calculates according to purchasing power, China’s economic growth accounts for one third of the world’s growth. However, China’s impact on the world economy is not only measurable in terms of trade and economic growth, but also the positive impact it has had on lowering global inflation.
Shultz said that since 1990, China’s foreign trade volume has increased 7 times over. Toy exports from China account for 90% of the world’s total, garments for 50%, and electronic products for 16%. Between 2001 and 2005, due to China’s inexpensive export products, inflation in the US decreased by 0.28 percentage points every year, inflation in the EU decreased by 0.37 percentage points, Singapore 0.70 and Japan 0.65. China has also bought a lot of US government bonds and this has contributed to low interest rates in the US. Between 2001 and 2005, the interest rate on 10-year-term US bonds decreased by 0.15 percentage points every year.
In Asia, trade with China has greatly promoted the prospects of exports for many Asian countries. China has a great deficit in trade with global energy producers and Asian neighbors. In 2007, trade between China and India is expected to reach US$20 billion, four times what it was in 2002.
The UN report finds that the development in the Asia Pacific region will continue to be strong in 2007. It is expected that the average growth rate in the Asia Pacific region will be 7.4%, lower than 2006. China, India and Japan will account for 60% of the total GDP in Asia and 45% of the total import, which will bring considerable opportunities to the region.
The report also estimates that China’s GDP growth rate will decrease to 9.9%, mainly due to the policies the Chinese government has taken. The report attributes the overheating of the economy to one of the risks of slow growth. It recommends that China take measures to cool the economy. The fast growth of credit loans is a key factor promoting investment growth. Fast investment growth likewise causes worry about the overheating of the economy. However, the report argued that overheating is only apparent in a few sectors such as the iron, steel and cement industries.
The slowdown of the US economy will have a direct impact on China’s export as China exports a lot to the US. The report suggests that China raise domestic consumption demand to compensate for export, take fiscal measures in education, medical care and pension to reduce people’s savings, or use consumer loans and insurance to encourage people to consume.
