ANKENY, Iowa – China set its economic growth goal for 2014, in terms of its gross domestic product (GDP), at 7.5%.
China set the same goal last year and overshot it, instead growing by 7.7%. But recent disappointments in the industrial and real estate sectors now have some economists and traders wondering if 7.5% is a realistic growth target for 2014.
“I wouldn’t be too worried about it right now,” says Iowa Soybean Association Marketing Director Grant Kimberley, “at least from an agriculture standpoint. I still think there’s a lot of demand for food, and demand for meat.”
Kimberley says China has not historically preoccupied itself with a precise GDP number, which echoes statements at Chinese parliamentary meetings earlier this month from Premier Li Keqiang.
“The government, at least in my experiences, tends to downplay that number,” Kimberley says. “They’ll put a number out there, and they always exceed it. So they always, I think, lower expectations. And they always are typically talking about how they’re not going to meet that number. Usually halfway through the year you start hearing chatter that ‘China’s not going to meet that number; their economy is slowing down,’ and, at the end of the year, ‘Oh, they still beat the number by a percent.’ So that does happen in China, quite a bit.”
With new President Xi Jinping instituting market-oriented reforms, Kimberley adds that less spending in certain economic sectors could be an indicator of progress. However, he concedes there will probably be a future point at which China’s growth does begin to slow.
“There’s a little bit of an austerity movement, I guess you could say, coming through the Chinese government when it comes to government expenditures” Kimberley explains. “But I think, you look at the general economy over there, and it’s humming along pretty well. And I was just over there this past summer, and saw no signs of anything slowing down. As a matter of fact, in Shanghai they were building one of the tallest building in the world at the time, when they’d just built one of the other tallest buildings [in the world] a couple of years prior to that. So they are still moving ahead. They probably will slow down; you can’t be at this kind of sustained growth forever. But they are still moving ahead, I think.”
But were China’s economy to slow down, what might happen to the soybean crops grown here in Iowa and the broader U.S.?
“We export nearly 60% of the U.S. crop every year,” Kimberley says. “So it’s very important that the world economy continues to grow, so we can continue to move the excess amount of soybeans that we grow in this country overseas to other markets. Any kind of slow down would be detrimental to the soybean industry, but at this point I still think you’re going to see continued growth. South America is still growing a lot of soybeans; we’re growing a lot of soybeans, but it seems like whatever we end up growing as a world, on a world supply stage, the end-use market still tends to pick that up, and suck up that excess supply.”