The Chinese government insists that the economy is sailing smoothly and will achieve its seven-percent growth target, but exports and domestic consumption are slowing.
The biggest problem in China is that government measures are not having any effect. Authorities have cut interest rates since last year and devalued the yuan recently, but the stock and real estate market slumps are worsening. This is the first time since China embraced a free-market economy 30 years ago that state measures have not worked. And now foreign investors are leaving.
The shock from China’s slowed growth is more dangerous to Korea than one might think. China accounts for a quarter of Korean exports and is its top export destination. That means Korea is among the Asian countries set to suffer the most from the devaluation of the yuan, according to Morgan Stanley.
The government and Bank of Korea must assess the situation and prepare for any contingency, and businesses must do the same. Investors should be wary of parking their money in China.
Full article: China’s Economic Woes Should Set Alarm Bells Ringing (The Chosunilbo)