Thursday, February 13, 2014

Is the Chinese Economy Sustainable

The big economic news of the 21st century was the meteoric rise of the Chinese economy and whilst economic figures being quoted almost daily, seem to indicate its continuing rise, some analysts are questioning whether the race to economic superpower will continue or whether China is running out of steam. Is the Chinese Economy Sustainable?
China has risen from a closed socialist economy with an arcane infrastructure in the 1980′s to what it possibly the world’s biggest trading nation. The stratospheric rise has not been without problems, partly as a result of the hangover from communist days and partly because the economy is facing tough regulatory decisions to help it secure a stable socialist capitalist future.
It’s not all been good news on growth either. After a period of non-stop strong expansion, there was a stutter in the second and third quarters of 2013 before the economy resumed its upward path in the last quarter. Whether it will continue to gain ground depends on many factors, one of which is the slowdown in overseas demand which it is trying to counter by stimulating domestic demand.
Rising wages are helping, as is the People’s Bank of China stimulus and the relaxing of lending criteria. This is vital for the expansion of small businesses who have struggled to obtain finance in the last few years.
The government is also keen to see the country undertake the next stage of its economic transformation with the transition from an industrial and manufacturing bias to a more balanced economy, by developing the service sector.
There’s much work still to be done within the economy and some say that a period of consolidation would be beneficial to the country’s long-term economic health, fearing problems from a ‘too far too fast’ approach. What 2014 will bring for China remains to be seen.

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