LyrArc Article Gist
Some economists expect growth in China's GDP to slow down to 5.8% for the 4th quarter. China's export driven growth model based on factories with plentiful hardworking young labor including young women, and plentiful foreign investment, Chinese investment from HongKong and Taiwan, and plentiful capital generated from China's high savings rate, and supply of land from local government officials eager to participate in the boom, is finally slowing down, after 3 decades since Deng launched China on this path. However this slowdown is happening drastically, and the whole model is coming apart. The first signs came earlier this year as the government initated a shift in policies after seeing the costs of runaway growth on the environment and in pollution of air and water, and in the wages of labor. Laws protecting labor rights and wages, and stricter pollution laws and enforcement for the first time in years that suggested the government was serious, pulled the bottom off of marginal export industries and companies. Only the larger better run companies were able to operate in this environment. About 67,000 factories closed in coastal regions in the first half of this year. See the link to this. Now that process is hit by the global credit crisis and the demand decline in 2008, and possible demand collapse in 2009 in US export markets if some things like the auto industry take a bad turn and unemployment jumps, all are hitting hard at China's export sector. This is in turn hitting investment as in Germany as companies pull back, and nervous consumers with losses in the stock market and seeing a decline in housing prices pull back on purchases resulting in inventories building up for different industries including the important auto industry.