Despite the increase in
consumer spending, favorable trade deal with the U.S and standing as the
second-largest economy, China is still facing a battle with its slowing
economic growth figures. Since China opened up to the world about four decades
ago, it has been facing some major challenges, and the largest one being their
tendency to borrow. The country is loaded with trillions of dollars of debt,
and this resulted in an annual growth rate of 6.1 percent reported last Friday.
This is the slowest pace it has faced in the past 29 years, and careless
borrowing has harmed the economy in the short run. As a result, China's
corporate sector has been struggling to pay their bills as they are strapped for
cash. The auto and property industry, two key drivers of growth, have been
struggling with their sales alongside. Chinese companies will find it expensive
to borrow in the future if their current debts are not curbed. Certain
companies did not improve their sales, despite having borrowed large sums of
money, and Larry
Hu, chief economist at the Macquarie Group said these red flags indicate that
the economy's recovery Is not likely in the next four quarters.
What
measures do you think China might take to alleviate the economic pressure from
their debts?
2 comments:
While I am unsure of what China's next steps may be in order to maintain their historically incredible growth, I believe that this may also not signal a potentially rough future for China. Considering it only opened up to the rest of the world around 40 years ago, and it was not doing great at the time, their historical growth showed them going from poorer and undeveloped country to almost catching up with the Western World. I believe this slowing down of their growth rate shows that the Chinese economy is finally beginning to stable itself out.
Firstly, China might focus on improving their labor issue due to their declining growth rates. This might help alleviate economic pressures, and furthermore, they do have a consistently growing economy, so it might help override their current problems with debt.
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