It was always said that, in economic terms, if America sneezed the world would catch a cold. The global nature of commerce is such that a perturbation in a major economy will have a knock-on effect around the world. This explains why economists are watching the performance of the world’s second largest economy with keen interest. If the Chinese economy were to slow down, it could harm prospects for the still less than robust global recovery. Some slowdown in China’s growth is inevitable since it has grown at a prodigious rate since the communist Chinese government started their experimentation with capitalism.
Figures just released for April show that economic activity in China has picked up, somewhat allaying fears that the economy was slowing down. Exports saw a modest year-on-year growth of 0.9%, but this reversed two straight months of significant falls of exports: 18.1% in February and 6.6% in March. China imported more goods from the rest of the world in April, up by 0.8% year–on-year compared to an 11.3% decline in March.
The West hopes that China will open its domestic market up more fully to imports as China seeks to rebalance its economy moving the driver from exports to satisfying domestic demand. With a population of almost 1.4 billion people, there is huge potential in satisfying demand within China. However, before the full impact of this can be realised, China would need to see a very significant redistribution of wealth. There is a marked difference in income between rural and urban areas and vast wealth is in the hands of a tiny minority of the population (pretty much like everywhere else).
It is also likely that China will need to agree to a significant (>20%) revaluation of the Yuan at some stage if it wishes to exert more influence on the world stage as a major trading nation, but authorities seem determined that any such step will be an incremental process.