EXPERTS ADVISORY

China has announced that its economy expanded by 6.8 percent in the fourth quarter of 2015—the slowest growth since the global financial crisis in 2009. University of Michigan professors are available to discuss what’s going on in the world’s second-biggest economy:

Linda Lim is a professor of strategy at the Ross School of Business.

“The latest data out of China confirms what everyone already knows, in other words, GDP growth slowed in 2015,” she said. “This itself is not a problem if it reflects the impact of long-term structural reforms that the government has long said it wants, for example, SOE reform which would reduce output and employment.

“But so far there haven’t been signs of major structural reforms being enacted. So the slowdown is mainly the result of China’s old investment- and export-driven manufacturing and infrastructure-centered economic model losing steam as expected, and short-term macroeconomic factors such as slowing external demand, monetary contraction resulting from government intervention to prop up the yuan, capital flight, debt overhang, etc.

“Conventional fiscal and monetary policy stimulus now have little room to maneuver, and it’s questionable if the government should even attempt them given reduced effectiveness and the risk that the distortionary incentives generated slow down the deeper structural reforms that are required.

“Perhaps both China and the world need to accept and get used to its ‘new normal’ of slower—but still positive and higher-than-world averages—GDP growth going forward.”

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Mary Gallagher, associate professor of political science and director of the Lieberthal-Rogel Center for Chinese Studies, is an expert on Chinese politics, law and society.

“China’s lower GDP numbers should be expected as the government attempts many ambitious changes at once—reforms of the financial system and the state sector, an anti-corruption campaign that eliminated many of the self-enriching incentives for local officials to boost growth, and a transition from over-reliance on government investment in fixed-assets to consumption based growth,” she said. “The key question now is whether the government bit off more than it can chew.”

Contact: 734-764-3566, [email protected]