1CHINA’S ECONOMIC GROWTH SLOWDOWN: CAUSES, CONSEQUENCES AND POLICY OPTIONS

During its reform era China has experienced, and become accustomed to, high rates of economic growth, and rapid jobs growth particularly in the rural collectives and, more recently, private enterprises. Strong fixed asset investment and consumer demand in conjunction with a strong growth of net exports, provided the foundations for this. However during the latter part of 1997, after four years of monetary austerity measures, there were worrying signs that the growth of the economy was slowing considerably, primarily from a weakening of consumer and investment demand. While the growth of net exports initially remained buoyant, this has become threatened by the financial crisis afflicting other East Asian economies. Such developments are of particular concern to China where jobs growth and social cohesion is paramount. It is widely perceived that the country must keep growth above 7-8 % if enough new jobs are to be created to absorb the unemployed, and that without appropriate action by the authorities the economy will be dangerously close to this in the foreseeable future. This sharp economic slowdown will also threaten the government’s attempts to restructure the country’s SOEs as well as the debt laden state banks. It will have broader adverse implications for other Asian nations attempting to export their way out of their financial difficulties. The Chinese authorities currently face