China's GDP Growth and 'Dis-Synergy'

By: Ian Campbell | Mon, Jul 16, 2012
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'Synergy' is a word typically thought of in 'positive terms', that is - 2 plus 2 equals 5. However, consider that synergy is broadly defined as "two or more things that function together to produce a result not independently obtainable" (Wikipedia), and hence can also be thought of in negative terms, as in - 2 plus 2 equals 3.

Stated in 'negative terms' the result is 'dis-synergy'. Many things can result in dis-synergy, one of the greatest of which in the context of the world economy can be negative contagion, as negative economic occurrences in one country can negatively impact economic occurrences in one or more other countries. Thus the old saying that if 'America sneezes, other countries catch colds'.

This makes China of particular importance, particularly given the current clear signals of Eurozone economic deterioration, where collectively the Eurozone at U.S.$17.6 trillion represented 25% of 2011 reported world GDP (source: Wikipedia).

Consider this in the context of latest 20,000 foot China economic reports and commentaries that suggest:

Clearly one might:

The foregoing ought not to lead one to the conclusion that China's current forecast growth is, viewed in isolation, either poor or terribly disappointing. The real issue is that any reduction in China's percentage GDP growth is 'on the margin', and may have a disproportionate affect on growth - and hence economic recovery and well-being - in the developed economies generally, and perhaps in resource dependent economies such as Australia and Canada in particular.

Topical Reference: China is probably doing worse than the headline GDP growth suggests, from Also Sprach Analyst, July 13, 2012 - reading time 3 minutes; 3 threats to China's second half economic recovery, from Also Sprach Analyst, July 16, 2012 - reading time 3 minutes, and Shadow Banking in China - The Wenzhou experiment, from The Economist, April 7, 2012, reading time 2 minutes.



Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Business Transition Simplified

Through his website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world economic and financial markets influences on those two topics. A recognized business valuation and transition authority, he founded Toronto based Campbell Valuation Partners Limited (1976). He currently is working to bring his business valuation and transition experience to both business owners and their advisors in our new economic, business and financial markets normal.

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