Impact of slowing China economy: Alaska's China Era continues.

• Author: Wolf, Greg
• Position: SPECIAL SECTION: International Trade

For the past fifteen years, the driving narrative for Alaska's export industries has been the rise of China as the primary destination for Alaska's vast natural resources. Following a steady, upward trajectory the Middle Kingdom became Alaska's largest export market in 2011, displacing Japan which had held that position for many decades. Beyond exports, during this same period, China has also become an increasingly important factor in other sectors of the Alaska economy, including air cargo, tourism, and investment.

The question being asked now by many is: What impact the economic slowdown currently being experienced by China will have on Alaska? If, and to what extent, will Alaska's exports and other commercial interests with the country be affected?

Obviously, what is always good for Alaska is when its major customers are experiencing a growing economy and a strong currency. This ideal scenario beneficially impacts the demand picture--they need more of what we are selling, and the purchasing power picture--exports priced in dollars, such as ours, are cheaper for them, so they can more readily afford what we are selling.

China's economy is still very much on a growth trajectory, just at a somewhat slower pace. Current estimates are for China's GDP to grow at a 6 to 7 percent rate, down from the customary 8 to 9 percent rate that was becoming increasingly unsustainable as China's economy grew to be the second largest economy in the world, second only to the United States. Its currency also remains strong, even after recent steps by the Chinese government to devalue the Yuan in an effort to keep their exports competitive with other exporting nations.

Transitioning Economy

China is taking steps to transition its economy from one driven by exports to one driven by consumption. For Alaska, this may result in something of a mixed-bag for the state's exporters. Some may suffer while others benefit. Demand for minerals, for example may decline, but seafood exports could increase as more affluent consumers have greater discretionary income to purchase it.

Some Alaska service-sector companies might also benefit from growing affluence and consumerism in China. For example, one Anchorage-based architectural firm is already active in the China market designing hotels and resorts to cater to Chinese vacationers. Another Alaska company is successfully selling air traffic management systems to serve the country's rapidly expanding aviation sector. Alaska...