Uighur riots in Urumqi, arrests of foreign businessmen on charges of industrial spying and bribery, angry rhetoric on trade in response to U.S. attempts to reduce greenhouse gas emissions: there is no shortage of disturbing news out of China. Yet through it all, there remains one constant: China's economic growth continues to astound.
The latest numbers, out Thursday, put GDP growth at 7.9 percent for the second quarter of 2009, compared to a year ago. Amazingly, the Economist reports a Goldman Sachs observation that "GDP grew at an annualized rate of 16.5' in the second quarter compared with the previous three months."
The numbers are all the more remarkable when one considers that both Chinese exports and imports have been falling for eight straight months, and the economy of China's most important trading partner, the U.S., is still contracting. Maybe we're going to have to revisit that "decoupling" theory after all, because it sure seems as if China is shrugging off the global recession like a wet Labrador shaking water out of his fur.
How China is doing this is no mystery. A massive government stimulus funneled into infrastructure upgrades and a loosening of reins on lending by state banks. The trickle down effects are clear: The Economist reports that "In the year to June fixed investment surged by 35 percent, car sales rose by 48 percent, and purchases of homes by more than 80 percent. After falling last year, home prices are now rising briskly in some big cities, and share prices have soared by 80 percent from their November low."
There's always the chance that China's easy money policies might lead to the creation of a bubble economy familiar to Westerners, with the corresponding deadly fallout. But there's also a possibility that we're witnessing a truly momentous turning point in world economic history -- that moment when China becomes its own engine of growth, rather than the world's cheap-labor manufacturing zone.