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- iHaveNet.com: Economy
by Danielle Kurtzleben
China's GDP growth has fallen significantly. Here's why it matters in the U.S.
To an American, an economic growth rate of 8 percent sounds like a cause for celebration. So to see hand-wringing over another country's growth rate slipping to 8 percent can be like hearing about someone who can only afford three Ferraris instead of four -- it's a nice problem to have. But for China, whose growth rate dipped to 8.1 percent in the first quarter of 2012 from 8.9 percent in the fourth quarter of 2011, it signals a real problem that could create ripples in the U.S. economy.
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The most direct way in which a Chinese decline might affect the U.S. is in demand for exports, says Paul Edelstein, director of financial economics at IHS Global Insight. Edelstein says that while China is not a large U.S. export market, its importance is rapidly growing.
The decline in china's growth rate "translates to a mild negative for the export markets," he says. "China is an increasing export destination for the U.S. About a decade ago we were sending 2 percent of our exports over there." Now, he says, that figure is around 7 percent.
That export growth is particularly speedy when compared to other U.S. export markets. Total U.S. exports to China rose by 542 percent, from $16.2 billion to $103.9 billion, from 2000 to 2011, as the
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China's growth rate may seem disproportionately fast to Americans, but 8.1 percent is its lowest growth rate in nearly three years. Newly industrialized countries like China tend to experience rapid economic growth. A decline in that growth rate of nearly a full percentage point signals a weakening Chinese economy.
That weakening could cause China to ease its monetary policy, which could pose additional indirect problems for the U.S. and other global economies.
"A shift in [Chinese] monetary policy, while it appears that U.S. monetary policy is on hold, would reverse that trend toward depreciation or at least arrest it temporarily," says Edelstein.
Some officials in the U.S. have already campaigned hard against an undervalued renminbi. Last fall, the
The U.S. has already seen one effect of the Chinese slowdown. News of the slowdown contributed to disappointing openings for Dow Jones Industrials, the
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Slipping Chinese Growth Could Hurt U.S. Exports