FriedRiceNSpice
Major
The effect is neither massive nor permanent. There are both long-term and short-term factors driving down economic growth. Short-term factors include 1) being at bottom of economic / investment cycle 2) effects from corrections in real-estate 3) decreased demand in many significant markets for manufactured goods. Long-term factors are 1) less and less low hanging fruit / lower ROI on investment 2) rising labor costs leading to labor-intensive low value-add manufacturing being no longer viable even in 2nd/3rd tier cities 3) already high level of development / output.
Short-term factors is dampening the economic rebound, but it is sound policy to channel the rebound potential into correcting long-term risks rather than pursuing maximal growth for short period of time. Long term growth is never going to bounce back to sustained 6% growth anyways. Sustaining around 5% growth for next decade before dipping even lower to 4-5% is best long-term outlook.
However, in order to achieve and sustain such levels of long-term growth, the policies of the previous decade will not work. Continual policy changes will be needed in order to continue growth and development. There are real risks to long-term growth that needs to be addressed. Despite the economic situation so far this year not being as rosy as some would hope, it is important to not misinterpret the situation and come to the wrong conclusions regarding policy. Government policy makers needs to focus on long term risks and focus on healthy sustained growth and not be distracted by propping up short-term growth to long-term detriment.
No, the increased rates and inflation has nothing to do with demand. The cause is supply shock. East Asian exports is a direct gauge for global demand, and exports are down in all East Asian countries across the board.
