Source: http://pbl-eyetter-bowman.blogspot.jp/2008/11/cartoon-mccain-and-obama-to-work-n.html
A reason for the slowing growth has to do with the massive fiscal package that the government had injected into the economy four years ago. Much of the investment in order to save the economy were directed towards infrastructure. As I mentioned in a previous post, this was proven to be very effective and produced many positive outcomes (at first), such as the impressive short term economic growth during 2009 - 2010 period. However, what I did not mention was that the increased capacity caused a significant surge in prices, especially in the property market, which led the economy into high inflation. In order to deal the overheating economy, the government implemented a set of policies to reduce spending, which in effect, is reflected through the declining economic growth in China.
The important question right now, I think, what effect it has on other economies. Broadly speaking, China had been the support that struggling economies around the world needed, especially when US and Europe's economy is still in bad shape. China's slowdown can only cause hindrance and negative impact on other economies. Tai Hui From Standard Charted Bank in Singapore stated that "China has been a big factor for the slowdown in Asia this year" and that if China's growth continues to be like this then "that's going to mean very difficult (for) manufacturers in this region".
Declining level of confidence within consumer and business groups may further lower consumer and business spendings, which is already showing signs of weakening in China. The central bank has lowered the interest rate two times since June and the government has tried to boost aggregate demand by further injecting money into the economy - these market based approaches seems to not be effective at all in this situations, which urges the government to start thinking of new ways to tackle the problem.
