ANALYSIS:Brian Cowen has been seeking business in China. But what for Ireland and the world if the boom there falters, asks Clifford Coonan?
WHAT GOES up, must come down, a truism repeated more than once in the past few weeks in relation to the Chinese economy. Could the world's fastest expanding major economy, with its annual double-digit expansion fuelled by its voracious appetite for cars and consumer goods, come crashing down, triggering an economic tsunami on a devastating global scale?
There are fears that, as such a huge consumer of the world's natural resources and a potential market for goods and services from the developed world, a serious slowdown in China could cause a nightmare chain reaction around the world.
Last week, the government statistics office in Beijing dropped a bombshell - a long anticipated piece of bad news, but explosive all the same. Third quarter gross domestic product growth had fallen to 9 per cent, compared to 10.1 per cent in the second quarter and 10.6 per cent in the first.
Even the double-digit numbers from the earlier periods represent a slowdown from last year, when Beijing racked up a sturdy 11.9 per cent increase. The National Bureau of Statistics, in releasing the third quarter data, blamed the global financial crisis for the lowest increase in five years.
And there are plenty of doomsayers out there as the Chinese economy slows.
Gordon Chang, author of the 2001 book The Coming Collapse of China, has long argued that non-performing loans pose a huge threat to stability and that China's accession to the World Trade Organisation could leave the economy very vulnerable. This week in Forbes magazine he said the byproducts of economic growth in China, including unfunded social welfare obligations, a degraded environment and rampant corruption, may pose a serious threat as Chinese growth falters."When that happens, much of what we think we know about the Chinese economy - and China itself - could become obsolete," he wrote.
China's export growth rate is expected to fall to 10 per cent next year from 22 per cent this year, which will affect regions like the Pearl River Delta, which accounts for over one-fifth of China's GDP and produces over 36 per cent of China's exports.
Recent weeks have seen the shutters come down at 10,000 factories in this area, as the demand for the toys and knick-knacks that have been the foundation of the country's export boom dries up in Europe and the US.
The local government has been forced to intervene, setting up funds to pay wages for workers, many of whom have never experienced a downturn.
In the past days, shares in China's largest copper company Jiangxi Copper tumbled over 13 per cent after it reported a nearly 30 per cent fall in third quarter net earnings, and the outlook wasn't rosy. Falling crude oil prices have battered PetroChina, Asia's largest oil and gas company.
Much has been written about the building boom, some of it by this very correspondent, about the thousands of cranes dotting China's emergent cityscapes, but now it looks like demand for cement is seizing up.
The iron ore dug out of the ground in Western Australia and exported to China builds a city the size of Brisbane, with two million people, every month. A serious slowdown in China, the world's biggest consumer of iron ore, would badly hit Australia, the largest exporter of iron ore in the world.
It's not that long ago since scrap metal fetched huge prices, and authorities worried about the number of manhole covers that were being stolen to be sold on as scrap.
The country has grown by nearly 10 per cent a year on average every year since Deng Xiaoping came to power in 1978.
But building in the private sector, especially apartments and offices, has effectively stopped, with the only building going on in state-sponsored infrastructure.
Multinationals who had been buying up assets at a fast rate in China have been told to ease up until the credit crunch is over.
All of this downbeat news feeds into a growing suspicion that China has had its cake and eaten for way too long, and that there is simply no precedent for a country growing and growing without some kind of respite.
Establishing what that pause will look like and what it means to the rest of the world is the latest challenge facing global analysts. A hangover is considered inevitable and the Olympics, while meaningless economically, are widely considered the psychological trigger for China to face a slowdown.
Despite all this gloom, however, writing China off is premature. The Beijing government is well placed to help protect the economy from the worst ravages of a global downturn.
It has spent the last two years trying to fight inflation and cool the overheating economy, so it's a lot easier for it to take the foot off the brakes than it is to put them on in the first place.
The central bank has lowered its benchmark interest rate twice in the past two months, the first time in six years.
The State Council is increasing spending on infrastructure, offering tax rebates for exporters and allowing state-controlled prices for agricultural products to rise.
Expect significant measures to kick-start the property market to avoid house prices falling too drastically.
China has a lot of plus points to help out. Chinese banks did not issue subprime loans as a rule, and the country's €1.43 trillion in hard-currency reserves is a useful war chest to call on in a downturn. The currency is stable and there are high liquidity levels, all of which give China the most flexibility in the world to fend off the impact of the global financial crisis, says JP Morgan economist Frank Gong.
China is now a globalised economy, but its domestic market is still massively underexploited, and it is to this market that the government will most likely turn.
While it is a globalised economy committed to the WTO, China is also a centralised economy run by the Communist Party, and it has no real political opposition at home to stop it acting however it sees fit to stop sliding growth. Should the economy start to worsen significantly, public anger will increase, but China has been so successful in keeping a tight leash on the internet and the media that it is difficult for opposition to organise itself in a meaningful way.
Recent years of surging growth in China have certainly done a lot to keep global economic data looking rosy, but perhaps China's influence has been somewhat oversold.
It is not a big enough economy by itself to keep the global economy ticking over, accounting for 5 per cent of the world economy, compared to the United States with a muscular 28 per cent.
And whatever about slowing growth, 9 per cent is still an admirable rate, one that European leaders gathered this weekend in Beijing for the Asian-Europe Meeting would give their eye teeth to be able to present to their constituencies.
• Clifford Coonan is Beijing Correspondent of The Irish Times