genuine recession. For certain, higher unemployment rates could lead to increased
civil unrest.
Since China is the primary country that
is driving the global economy it’s important for those who may be contemplating
investing in China to understand the overall health of that economy. Normally, to
judge the health of any country’s economy
it’s important to look at five very important variables: Unemployment Rate; Inflation Rate; CPI-Consumer Price Index;
GDP-Gross Domestic Product Growth
Rate; and Balance of Trade). Obviously,
there are many other important financial
indicators but these five usually provide
the observer with a reasonable picture of
how things are going.
March of 1999 to 27. 7 percent in October of 1994. Over the past sixteen years
the inflation rate in China has averaged
around 4. 25 percent.
I. Unemployment Rate
The nonfarm unemployment rate in
China was last reported at 4.1 percent in
the first quarter of 2011. Historically (i.e.,
2002 until 2010), China’s Unemployment
Rate averaged approximately 4. 15 percent. It reached a historical high of 4. 30
percent in December of 2003 and a record
low of 3.90 percent in September of 2002.
Like the U.S. data, the real number of employed (listed as 30 million by the authorities) is probably much higher since a
large number of unemployed Chinese, like
their U.S. counterparts, have simply given
up trying to find jobs. Some put the true
number of unemployed Chinese at close
to 35-38 million.
III. Consumer Price Index
China authorities report that consumer
prices rose 6.1 percent in September,
down from August’s 6.2 percent but well
above the government’s predicted target
of four percent for the year. Food price
inflation held steady at August’s level of
13. 4 percent. During most of 2011 per-
sistent high inflation has impacted con-
sumer prices despite government moves
to rein in soaring food and housing
prices, which officials feared could cause
social unrest as more and more citizens
grow angry at higher costs for basic sta-
ples. According to government statistics,
the September price rises were driven by
a 40-plus percent jump in the price of
pork, a 14 percent increase for eggs and
12 percent increase for grain. Food
prices are of particular concern, as they
affect the daily lives of everyone in the
country, with foodstuffs accounting for
more than one-third of the monthly
spending of the average Chinese con-
sumer. Owing to almost a year of higher
than expected inflation the Chinese
worker has been able to secure increases
in their wages but not enough to keep
them on par with rising prices. Look for
more pressure on wage increases coming
from workers if inflation continues at its
current level.
IV. China’s GDP Growth Rate
In the third quarter of 2011 China’s gross
II. Inflation Rate
Unfortunately, similar to calculating unemployment rates there are numerous
methods used to measure Inflation. Normally, inflation rate refers to a general
rise in prices measured against a normal
level of purchasing power. The most
common used measures of inflation are:
(a) the CPI, which measures Consumer
Price Index; (b) the GDP (Gross Domestic Product) deflator, which measures inflation in the whole of the domestic
economy. The inflation rate in China for
September of 2011 was reported to be
6.1 percent, down from 6. 5 percent in
August and 6. 8 percent in July. Over the
past couple of decades China’s inflation
rate has varied from -2.2 percent in
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January 2012
