Cooling down, heating up – the WTO column

 

(today at Chinabiz)

 

The question whether China’s economy is cooling down or heating up depends largely on who you are talking to. Most appropriate comparison is probably the problem whether you describe a glass as half full or half empty. In both cases it is still the same glass.

 

New policies to cool down the car industry, China’s holy cow of economic growth, are having effect, writes the Financial Times today. What does that mean? The market has in May only grown 15 to 20 percent compared to May 2003, while that used to be 45 percent.

"The slowdown is widespread, across all regions, models and brands," said an industry consultant in the FT.

Colleague Richard McGregor admits that even that poor performance is still rather impressive. That thought is shared in a more negative way by the many visitors I met last week here in Shanghai: they all got stuck into those famous traffic jams that mostly kept the people in Beijing from reaching their destinations on time.

 

This week I attended the Asian Technology Roundtable Exhibition (ATRE) in Shanghai and – although there were some differences compared to the first internet hype – the atmosphere of roaming VC’s, enthusiastic IT companies and otherwise hyped up expectations about China’s booming market. (A report will be published later in a new Chinabiz series called “The Conference Report”)

 

China was able to slowdown in the second half of the 1990s a similar growth pattern as then Prime Minister Zhu Rongji hit the economic brakes forcefully. With hindsight we might add that the Asian financial crisis probably helped a bit to cool down China’s economy.

The current Prime Minister Wen Jiabao seems like a more thoughtful politician, less inclined than Zhu to rock the boat. That might not be very helpful when the economy has to be brought to a more moderate speed. And I guess nobody would be looking forward to yet another full-scale economic crisis?

 

Fons Tuinstra