China’s slackening economy has implications for the rest of the world, including the United States. Its second-quarter gross domestic product growth slowed to 7.6 percent, compared to second-quarter 2011 growth of 9.5 percent and average annual growth in recent years of 11.6 percent.
China’s Communist leadership has to react, since its legitimacy in the eyes of its 1.3 billion people lies in having presided over precipitous improvement in the standard of living since it took power in 1950. China has risen to become the world’s second-largest economy, after only the United States and ahead of Japan and Germany.
The Chinese government is reacting. The country’s financial sector is regulated and interest rates have been lowered twice recently to beef up demand. Prime Minister Wen Jiabao has warned sternly against real estate speculation to prevent the kind of bubble that popped and spelled disaster for the U.S. economy. There are hints of other kinds of economic stimuli coming to revive flat domestic prices.
Emphasis by China on its domestic economy helps counteract the negative impact on its exports caused by European and U.S. economic woes. Mr. Wen urged Chinese exporters to diversify their market by increasing sales to Southeast, Central and South Asian countries.