Money Morning Mailbag: China Needs to Boost Domestic Demand to Continue Economic Recovery
October 22, 2010 at 06:00 AM EDT
China released data this week showing its economy grew 9.6% in the third quarter from a year earlier, slower than years past but still significantly ahead of other countries that are struggling to stabilize their economies. A slight dip in growth is what China wanted. Its gross domestic product (GDP) has grown on average more than 10% annually since 2006. The country's central bank lifted rates this week by 0.25 percentage points for the first time since 2007 to further cool the risk of overheating. While working to maintain a healthy level of growth, China now has to contend with other countries devaluing their currencies to compete against a cheap yuan that is fueling an export-driven recovery. However, the whole world can't depend on exports – somewhere along the line there must be growth in demand.