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China Stares Down Economic Concerns


World financial leaders have just wrapped up talks in Shanghai over how to upend gloomy economic growth that's plaguing many nations in Europe, South America and Asia and even within the country hosting the meetings - China. China is the world's second-largest economy. Communist Party leaders have been quietly managing a slowdown in their manufacturing sector, a stumbling stock market and a fluctuating currency. More troubling to global markets has been China's silence on its economic challenges. But that could be changing, according to reports from the G-20 meetings. We turn now to NPR's Frank Langfitt, who's based in Shanghai. Frank, welcome to the program.


WESTERVELT: Interesting situation there, everybody's worried about global growth. What kind of tone did Chinese officials strike at the meeting?

LANGFITT: Well, it's really interesting. They were trying to reassure people. I mean, if you go back not too long ago, Chinese leaders were a lot more confident. The last eight or nine months with problems with the currency - so devaluations that freaked people out around the world, troubles with the stock market, like you mentioned - the message they're sending to people here in Shanghai is we're going to be able to manage this. We know it's not easy. The other thing they said that was really interesting is they acknowledged that economic reform is moving slowly. And this is a problem for all of us because if this reform moves slowly, it means the economy here continues to - growth continues to slow and there's less demand. That affects, you know, economies all over the world.

WESTERVELT: So they're acknowledging reform is moving slowly, and a lot of talks still though, Frank, about China's economy pretty doom and gloom out there. Do you think it's merited?

LANGFITT: Well, you know, historically, there's always an overreaction to China. If you remember not that long ago - let's say 2010, 2011 - you were always hearing oh, China's going to take over the world. Now the talk is it's a house of cards. The truth is always usually somewhere in between. Growth has been slowing, but it's still way over 6 percent, at least officially. And that's a lot better than most other countries in the world. One of the problems though is always the - kind of this nagging question about the numbers out of China. People don't always trust them. And this week, we saw the central bank actually omitted figures to make it harder to figure out how much money was leaving the country. And this just created more suspicion among people that say it was capital flight here worse than the government's been saying.

WESTERVELT: Omitting some economic information, and the government recently took extraordinary steps, Frank, to clamp down even more on the media. The president visited main news rooms of Chinese outlets and told them in essence, you know, tow the party line. And that doesn't bode well for transparency and accuracy of future economic news out of China, does it?

LANGFITT: Well, you know, the party has a strict narrative now. And the idea's - what they're basically saying is we're going through a difficult time, but we've got this. And there's no tolerance for any variation from that narrative. Now, last month, there was this reporter - he was actually fined $23,000. He reposted a message from a Chinese brokerage that had told its top investors to sell stocks. That said, people here aren't stupid. They're very aware of what's going on in the world, and they talk a lot. And those with money are paying very close attention to the economy. So this is going to be very tricky for the government. Economics is highly psychological. If people feel the government is constantly trying to pull the wool over their eyes, they're going to send even more money out of the country. And capital flight right now is a really big issue.

WESTERVELT: Frank, here in the U.S., the presidential season is in full swing. And Donald Trump, the Republican frontrunner has really been hammering China for devaluing its currency. It sounds like China's trying to assure other nations that it won't be weakening the yuan again in the near future. How big a deal is that, and how do we know they'll stick to that plan?

LANGFITT: It is a big deal, and that's why they keep mentioning it. Sticking to it may not be that easy. The economy will probably continue to slow here. And the thought is they may have to devalue the yuan even further in order to kind of help exports, which are not doing very well and to kind of help the economy in general. The concern for other countries is that if the yuan is devalued, Chinese can't buy as much. It's a weaker currency, and then that hurts demand even more. And one of the reasons we're seeing a slowdown globally is there's not the same sort of Chinese demand that everybody kind of expected. So people are going to be watching the currency very, very closely because it's not just about China. It actually affects economies throughout the world.

WESTERVELT: NPR's Frank Langfitt in Shanghai. Thanks so much.

LANGFITT: Hey, happy to do it, Eric. Transcript provided by NPR, Copyright NPR.

Eric Westervelt is a San Francisco-based correspondent for NPR's National Desk. He has reported on major events for the network from wars and revolutions in the Middle East and North Africa to historic wildfires and terrorist attacks in the U.S.
Frank Langfitt is NPR's London correspondent. He covers the UK and Ireland, as well as stories elsewhere in Europe.
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