The China boom is over. That could be good

On 18 April last year, following a trip to Fujian province, I wrote that the great China infrastructure build out — the most important economic story of the last quarter century — was coming to an end.  It is worth reading that post in full because this was an entirely anecdotal impression gleaned from what I saw in the landscape and was based on no data whatsoever; still, China looked unmistakably different than it had on previous visits, with much less large-scale construction and much more middle-class consumption.  This was not a cyclical downturn I saw, like the periods of growth and recession in developed economies, but rather a once in a generation shift from the singularly heady days when a modern economy is first established.  The French, when it happened to them, called this stage Les Trente Glorieuses for the thirty years from 1945-75.

In June of last year, investment bankers started crunching the numbers on China and saw a possible slowdown ahead.  Yesterday, as the New York Times reports, it was made official:

Premier Wen said in his annual report to the National People’s Congress on Monday morning in Beijing that the government had scaled its economic growth target back to 7.5 percent this year, down from the 8 percent that Beijing has set as a minimum growth target in recent years. If growth does come in at only 7.5 percent, it will be the slowest pace in 22 years…At its peak, in 2007, China’s economy grew at an annual pace of 14.2 percent. As recently as 2010, it was 10.4 percent. Now, though, the government is trying to guide the economy toward a minimum average annual growth of 7 percent through 2015.

To Americans in the Great Recession, growth of 7% or 7.5% doesn’t sound too bad but for China some large part of that growth will be eaten up by population increases and the continuing migration to the cities.  Managing the downgrading of expectations will be even more of a challenge.  I talked to a Chinese woman in her late-twenties who described her husband as belonging to ‘another generation’ with an entirely different outlook on life because he was eight years older; in fact, in China, that is the duration of a generation because economic growth has been so rapid that average incomes have doubled every 6-7 years.  By this measure, three generations of Chinese have come of age knowing nothing but the formidable tailwind of the country’s long, frothy economic boom.  No doubt, some of them will respond to a slower pace of change with discontent and frustration but others — many others, would be my guess — will start to diversify the sort of careers they pursue, moving into less remunerative but more gratifying work in the arts, social welfare, and so on.  They might even become politically engaged again, much as happened at a similar juncture in Korea and Taiwan.

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The photograph above comes from an attempt by a group of street artists in Kunming to draw my portrait, with wildly varying results — the full story can be read here.  Or click here to read about the beautiful (and award-winning) bridge in a small village in Fujian that I wrote about and photographed for Le Monde d’Hermès.  Or here to read the article I wrote for the New York Times about Kunming, in southwestern China.  Or here to read about the unusual, centuries-old communal houses in Fujian that are on the verge of extinction.  Or here to read all my China posts.

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