The American Interest

A Halting Dragon

The reports of China’s pending economic collapse have been greatly exaggerated.  There are signs that the world’s second-largest economy is entering a period of long-term restructuring marked by a slowdown, but the process is neither unexpected nor chaotic.  A sober look at China’s economic transition will allow us to assess its impact on the country’s political stability and on Beijing’s overall geostrategic calculus in the years ahead.

China’s growth slowed to 6.9 percent in 2015, and the 2016 forecast is in the 6-7 percent range.  The slowdown is primarily the result of the country’s growth in domestic consumption over exports, and the expansion of its service sector vis-à-vis manufacturing.  Both trends had been forecast for years.

Last holiday season, China-based online orders of U.S. brands increased eightfold over 2014.  Car sales have been rising every month since last July, reaching a record 2.44 million in December.  Residential housing prices are climbing again after a drop early last year.  Starbucks and McDonald’s are aggressively expanding the number of their Chinese stores.  Nike and Apple, among others, are reporting record sales.  Growth in consumer spending is expected to exceed five percent per year over the next decade, far ahead of the United States and Japan.

The Shanghai Composite...

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