China Manufacturing Growing... Yet the GDP Slows

After writing quite a bit over the past few weeks about US manufacturing and the current boost of growth, I figured to see how our great rival of the eastern hemisphere was fairing in the same industry.  Bloomberg reported last week that China had received an increase in manufacturing for the third straight month.  This comes at the same exact time as US manufacturing has taken a sharp rise over the same time.

However, there is a problem that seems to be following both China and the US.  Both countries saw a decrease in growth in GDP this past quarter.  This could be a sign that the economy, at least for the US, is not quite at the level we have been expecting since quarter 3's promising numbers.  China is still growing at an 8.9% rate, far above the United States, but economists believe that the market is likely to slow down even further.  Economists predict the first quarter growth rate should be around 8.6% in China.

I predict that China is going to continue to grow throughout 2011, however, at a far slower rate than expected. With the rising wages in China, companies are always looking to find ways to save on wages and move to places with the technology capable of doing business at the lowest cost.  With these wages comes more growth in human capital, which China has needed to transcend past the agricultural and more rural development that harbored much of the GDP in the past.

What should be interesting is seeing  how China reacts to the lowered growth in GDP.  Like the United States, I don't believe that the manufacturing is going to play a huge role in the growth of the Chinese economy.  But they do send some shocks through the markets and offer consumers faith to invest in the market.  I don't believe that China and many of the eastern Asian countries have experienced the intense recession that the rest of the world has dealt with.  This may become a problem, as the closely woven global economy seems to leave no prisoners as nations begin to fall.

References:

1. "China Manufacturing Improves for 3rd Month". Bloomberg News.