Chinese economy : a house of cards?

Beijing Warnings about the Chinese economy are rampant in the Western media. It is largely because economic that does not operate according to market principles to growth a consecutive growth over a long period, which seems historically unprecedented. China is simply not in line with conventional wisdom on the factors necessary for sustained and sustained growth: a well-developed financial system, the rule of law, democracy. Therefore, the widespread notion is that China’s economy must be a house of cards, fit to collapse at the slightest bad wind. And this notion may well be comforting for those who are outside that China has grown great and powerful.

china

China’s growth model has certainty created enormous risks, like those that have been the cause of disaster for other economies in the past. In the last decade and in demography, much of the growth was due to massive and, to a large extent, inefficient investment and an increase in debt, especially in the area of real estate development, as evidenced by Many residential properties of China. A financial system is supposed to allocate the wealth of a nation to its most productive possibilities. But even the most generous interpretation of the success of growth in China must recognize the inefficiencies and costs associated with a model that has produced dramatic results in terms of official GDP but has led to environmental degradation. Wasteful use of resources.

Enormous risks

The Chinese economy faces a number of enormous risks. The first is a wave of capital coming out of China – mostly people who withdraw their money from the country – which could destabilize the financial system as well as the economy as a whole.

The second is a series of concerns about the Chinese financial system, that is, there are currently, including potential instability of the banking system (too many bad loans), wild stock market fluctuations And the size of the parallel banking system are not well regulated).

The third set of risks is related to the more fundamental aspects of China’s economy, political structure and policy development. These include the possibility of economic development, political instability fueled by the government’s desire to further tighten control and mistakes in politics.

These risks do not fall into the nursed silos of course and the feedback loops among them create an even greater uncertainty. For example, the development of economic and economic growth aims to develop a business management system and aggravate the problem of non-performing loans in the banking system, which could lead to a greater name of capital outflows. China is also facing a difficult and risky transition from a command-oriented economy to a more market-oriented economy. Indeed, the number of reforms and measures taken to promote the international role of the Chinese currency, the renminbi, have created their own risks for the economy.

Chinese Economy Growth prospectives

Although there are many reasons to worry about its financial stability, China has long adopted the strategy of rapid growth, which has kept problems as non-performing loans at the bay. This strategy seems to be convincing, with reservations. Robert Fogel, a Nobel Prize-winning economist, argued that the Chinese education system, dynamism in the rural sector, a rising service sector and a merit-based political system, span two or three decades. In 2005, Dwight Perkins of Harvard University and Thomas Rawski of the University of Pittsburgh predicted that China would see real GDP growth of 6-8% between 2005 and 2015 and 5-7% over the decade Next. They argued that China has generated satisfactory productivity growth for a feasible outcome, but only a company to a number of economic reforms. In fact, China has recorded average annual GDP growth of 9.7 percent between 2005 and 2015, so growth in the range of 5 to 7 percent over the next decade, while remaining remarkable for Such an important economy, a significant increase.

The slowdown in Chinese growth after 2013 fueled an even greater pessimism on the country’s outlook.

source : http://www.pbs.org/newshour/making-sense/column-chinas-economy-house-cards/

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