China’s Economy Depends on Its Politics

The news that China’s gross domestic product grew 7.5 percent from April to June -- down from 7.7 percent in the first quarter -- has provoked fewer gasps of horror than one might have expected. Chinese officials have been talking down the importance of the number for days. The mainland economy might ultimately grow 7 percent this year instead of at its usual double-digit rate, they’ve hinted. Nothing to worry about.

These officials, from Prime Minister Li Keqiang on down, are speaking to two audiences: the global financial elite, and the tens of thousands of junior officials who administer Communist rule in China. Top leaders like Li understand that the Chinese economy needs to slow down. Too much money is flowing into unproductive investments -- ghost apartment blocks empty of residents, mills churning out steel that no one wants -- and local officials, striving to meet high GDP growth targets, are often to blame. By implying that such targets are no longer sacrosanct, Li means to encourage a focus on the quality rather than the quantity of growth.