There were times when anything less than double-digit growth was seen as a slump for the Chinese economy. That appears to be a story from a long time ago: China announced Monday that its economy grew 7.5 percent in the second quarter of this year, compared with the same period a year ago.
Many economic experts, local and foreign, say they will not be very surprised if the world’s second-largest economy grew by 6.5 percent or so next year. China’s era of breakneck growth seems to be coming to an end, and it is Beijing that is spearheading its economy’s "hard” landing.
The new Chinese leadership is shifting its economic paradigm, rightly, from export-led, high-growth pattern toward a more sustainable and balanced one bolstered by domestic consumption.
Such a strategy change, called "tough-love” stance or "Leekonomics” after China’s Prime Minister Lee Keqiang who is responsible for economic operation, seems to reflect Beijing’s array of economic concerns, such as a widening wealth gap between regions and classes, corruption, state-dictated financing, a real estate bubble and even some signs of financial turmoil.
Korea must be one of the countries that most ardently hope these reforms will go well. The nation, which currently relies on its giant neighbor for one-quarter of its export sales, will be hit hardest by any economic hiccups in China. If China’s growth rate falls 1 percent, the Korean economy will also suffer 0.4 percent drop in growth rate with its exports declining by 1.7 percent. Formerly, the Korean economy caught a cold if the U.S.’s sneezed. Now China is taking the place of America.
This means that the nation has to make the same efforts to diversify away from the Chinese market now, as it had done with the U.S. market. In trade as in gambling, nothing is more risky than putting all your eggs in one basket.
China’s reform efforts show that the country is no longer a manufacturing base providing cheap land and labor for Koreans and other foreigners.
Before long, Korea will have to compete fiercely to preempt industries that will serve as new sources of growth in the future. Korea has so far been sandwiched between high-tech Japan and low-cost China. In a worst-case scenario, this country will continue to be sandwiched between Japan armed with traditional growth engine and China equipped with new growth engine.
It is doubtful whether the Park Geun-hye administration is taking all these cataclysmic changes happening in the neighboring country into account while hurrying to wrap up a bilateral free trade agreement at a "high level.” Those hard will be not only the domestic farmers but also the nation’s numerous small- and medium-sized enterprises, which will experience extreme difficulties when competing with Chinese firms, which can turn out products of similar quality at far lower prices.
Most dreadful will be a situation in which China dominates Korea not only in terms of an economy of quantity but also that of quality by successfully transiting from export to consumption and from large enterprises to smaller ones.
Given the track records of officials characterized by lip service and adherence to the status quo, Koreans can hardly remain optimistic about their economic future.