China's slowing economy could complicate relationship with US

China's FIRST McDonald's (Photo credit: flickr.Marcus)

But China's response to its slowdown, which comes ahead of a rare change in power, could also create new tension with the United States, where the presidential campaign is focused on the economy. China is turning to policies that may benefit its economy at the expense of the United States’. This year, for instance, China has surprised a wide range of observers by allowing its currency to lose value relative to the dollar, which makes its exports cheaper than America’s. And there are prominent calls inside the country for the renminbi to fall further.

“The economic slowdowns and the political circumstances in both countries could lead to trade tensions erupting once again,” said Eswar S. Prasad, an international trade expert at Cornell University. Driving China’s slowdown are several factors — most notably, the financial crisis and recession in Europe, which is sapping demand for China’s goods. Also contributing is a slow recovery in the United States and a significant decline in residential real estate investment in China. Exports are critical to China’s economy, accounting for more than a quarter of economic activity, compared with a little more than a tenth in the United States. To maintain overall growth rates, China has hoped to keep exports growing at about 10 percent per year, and for much of this year it has succeeded. ... Continue to read.

Related articles

• China economy: staring down the bottomless pit (sgtreport.com)
• China Rate Cuts All But Certain (minyanville.com)
• China's Economy Still Slowing (chinabystander.wordpress.com)