http://www.bbc.com/news/business-34237939
Fixed asset growth has slowed to a 15 year low to 10.9% for the world's second largest economy, China. Manufacturers have also cut down prices at their fastest pace in 6 years which is not a good sign for the Chinese economy. They have cut down their interest rates 5 times since November which helps explain why investors are not confident in holding savings in the Chinese market. The Chinese market is expected to grow at only 7.3% this year which is the lowest projection in 25 years.
On top of these issues, food prices have begun to soar as well in China causing high inflation which has caused civil unrest in some Chinese states. Is this the start of a major recession for China or do you think that the communist state is simply going through a phase they will be able to recover from? As we discussed in class, government intervention can be harmful and in a state owned market like China has, the market is not free to do as should. Is this proof that a free market is better or simply just a hiccup the Chinese can over come?
8 comments:
I agree that government intervention is harmful to the Chinese market, but looks like the government is not likely to give up the power to free market. However, even the growth is the weakest in 25 years, but i think the government is trying to increase export production by devaluing the yuan.
Its important to understand the importance of information in an Economic system, China as a communist government has restricted alot of information from its citizens when it comes to the idea of a seperate system from Communism. In such a system, Is there anyw ay for Citizens to protest with such limited knowledge of alternative economics?
I agree with Ying for the fact that increasing exports would probably be a good move for the Chinese government at the moment. The west, especially, has a higher demand for cheaper Chinese products and so helping the export side would help the Chinese government to bring in some foreign currencies and gradually help recover from this slowdown.
I agree with Ying and Sarim that the restriction of information has not helped their economy, and that part of their recovery is to increase exports and bring some more valuable foreign currency into China. I don't think this is a sign of a recession in China, but we will se what happens in the next couple of months.
An important part of this to remember is that while 7.3% of growth may be the lowest it has been in the last 25 years that is not a small margin of growth. In March of this year, the United States was only at 3.9% and while we are still recovering from our recession this is a decent growth number. As markets mature and economies stabilize growth does not increase to the large numbers that you see with smaller developing countries. While there are problems in the Chinese government, I do not think this is a statistic that needs to weigh on economists' minds at the current time.
I do not think right now is a start of recession for China。 As we know last year China changed its president. The new president Jinpin Xi did lots of reform and dealt with the corruption. The economy just grew too fast since last year and for now I think it is just a little "break" for China.
It seems that the measures that China is taking to stimulate its economy are similar to what the U.S. did after 2008 (i.e., lower interest rates, and lower cash requirements for banks). With lower interest rates foreign countries will be less likely to invest in Chinese bonds. However, they will be interested in purchasing merchandise from china due to the recent devaluation. Hopefully an increase in exports will combat China's decrease in domestic expenditure due to the devaluation and GDP decreases. Like Ashley said, I believe that although 7.3% is historically low, it's much higher than other countries. However, it is important to understand that China is still developing and needs to grow faster than the U.S..
I believe that the increase in exports has always been beneficial to the Chinese economy. Products made in China that are produced at lower cost of production has a higher demand in comparison with products made domestically. By devaluing the Chinese currency it will eventually help increase exports for China.
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