This is the biggest surprise of all. The Great Recession cut China鈥檚 real GDP growth by a third 鈥� down to 9.2 percent in 2009, according to the IMF 鈥� before it rebounded. But China this year is growing at an even slower pace: 7.5 to 8.0 percent, according to various estimates.
Much of this decline is deliberate: Beijing tightened lending to try to tame inflation, which was pushing up food and housing prices; now, it鈥檚 trying to loosen some of its control to make sure growth doesn鈥檛 fall too far. In many ways, China is paying the price for having engineered its recovery from the recession with a huge stimulus. Housing prices have soared. All the loans have created the potential for bad debt.
鈥淵ou have this credit bubble still hanging over the economy, so that limits the government鈥檚 ability to stimulate the economy,鈥� says Todd Lee, senior director of global economics at IHS/Global Insight, an economic research firm in Lexington, Mass.
A growing number of analysts think China鈥檚 growth will decline even more as exports fall, especially those destined for recession-plagued Europe. 鈥淭hings have become more precarious,鈥� Mr. Lee says, but he鈥檚 holding to his forecast of 7.8 percent growth this year with a very mild recovery in 2013.
