Over the past two decades, China’s rapid economic growth has helped raise living standards for hundreds of millions of people across the East Asian nation to unprecedented levels. Recent signs have shown, however, that this growth is slowing. Last quarter, the Chinese economy posted growth of 7.3%. While that may sound impressive, this rate is the lowest figure posted by the East Asian powerhouse since 2009. While this rate beat analysts’ initial predictions of 7.2% growth, IMF projections predict a year-end growth number of 7.1%, less than both current first-quarter growth levels, as well as the initial analysts’ projections.
This slowing in growth is not an accident, however. Indeed, Beijing has been implementing policies in recent years in an attempt to tone down what many see as being unsustainable growth levels that could lead to future problems if not tempered. Such policies include refusing to cut interest rates or lower reserve requirements, two strategies popular with many countries’ central banks at the moment.
While this strategy of bringing growth under control may help Beijing void bubble symptoms, such a strategy comes with a drawback; if new economic initiatives—like a plan to boost domestic consumption and spending—fail to bring about desired results, domestic pressures and discontent may increase.
The country’s own economic situation isn’t Beijing’s only area of concern, however. Indeed, Beijing’s primary economic rivals in the region—South Korea, Japan, and India—are likely seem primed to take advantage of China’s economic slowdown.
Despite a small dip in economic activity in recent months after a countrywide sales tax increase, Japan’s economy has been on the rise recently, evidenced particularly in the island nation’s recent export figures, which show exports at a seven-month high at the moment. Japan has also implemented a program of accommodative monetary policy in order to lower the relative value of the yen to give it a comparative advantage in trade.
To the west, Indian Prime Minister Narendra Modi seems to be committed to following through on promises made during his campaign to implement wide-ranging economic reforms. One reform proposal in particular that might have a wide-ranging impact is an initiative to privatize the country’s oil industry, an idea that has gained steam in recent weeks. Despite potential change on the horizon, however, Modi still faces many of the same challenges in attracting investors to his country that his predecessors had to deal with.
Looking north, in South Korea officials recently ruled out the possibility of any increases in stimulus spending or lowering of interest rates in the near term. However, many observers believe that after the end of quantitative easing in the United States later this month and the likely increased volatility in global markets that will follow, South Korea will be better prepared than most because of its stable debt and substantial foreign currency reserves.
Inevitably, it is difficult not to look at the economic situations of the aforementioned Asian countries—Japan, South Korea, and India—as diverging from that of China. With signs of the end of the Asian behemoth’s two-decade long period of explosive economic growth on the horizon, it remains to be seen whether any other countries in the region will fill the void. Though the non-China Asian countries continue to face hurdles in growing their economies, aggressive tactics by many of their leaders may just allow them to begin new chapters in their respective economic histories.