Still full steam ahead for China

The recently published European Union (EU) GDP figures, following those for the United States and Japan, completes the picture of slow growth in developed economies.

Slow growth in the advanced economies is already causing a fall in commodity prices - by Aug 16, the Dow Jones-UBS spot commodity index had dropped by 8.8 percent since its peak at the end of April. This will help China's fight against inflation. But recession in the developed economies would hurt China's exports and increase pressure on the US for a new round of quantitative easing, with destabilizing financial consequences for the world.

But the most decisive trend is not whether the developed economies face a double dip. The key fact, which is already clear, is that even without another recession, growth in the major developed economies is very slow. By mid-2011, that is, more than three years after the high point of the previous business cycle, no region in the developed world had recovered its peak level of GDP. America's GDP is 0.4 percent below its peak in the fourth quarter of 2007. The EU's and Japan's GDP are 1.8 and 6.0 percent below their peaks in the first quarter of 2008. Overall, this represents more than three years of net negative growth in the developed economies.

In comparison, China's economy has grown by more than 30 percent in the last three years. If the growth rate in the rest of the year continues to be as high as it has been until now, the expansion of China's economy between 2007 and 2011 would be 44.5 percent. And, assuming there is no recession in the US and the EU, America's GDP will have expanded by 0.8 percent and the EU's will have contracted by 0.4 percent in the same period.

The figures projected above could change depending on the developments in the second half of this year. But the relative order of magnitude is clear.