Economy Of China And How Strong It Is?

If you are looking at China’s growth, it should be evident that it remains strong as in the second quarter of this financial year. The economy has increased by 6.7%, which is a year on year figure. This data stays intact for the first quarter. The stock market having crashed last year and depreciation of Yuan, many would have expected that the Chinese economy would still be struggling this year. Many had predicted that China would move into recession this year. However, this year sees the Chinese economy and its proponent’s upbeat about its growth. For US Economy News, Go Here.

For those who would like to delve deeper into the economy’s state and understand how sustainable this growth rate is, they will know that the government has smoothened out the growth trends. The government has been playing around with GDP deflation last year when it depicted growth to be stronger than what was the real picture. The deflector has jumped high in the second quarter and the figures are closely aligned with price movements. There are different indicators for the economy, such as the investment in infrastructure that has moved up as well as property market that has been buoyant. There are other economic indicators as well, such as travel and personal consumption sector like automobile that have been buoyant as well.

Take A Look at the present state of China’s economy.


Reason to worry

The worry if any is not that the growth depicted for the economy might be misleading but that the investment engine might not be balanced right. As investment is around half of the GDP of the country, the growth in this sector is propelled by state investments. The slowdown in investments by the private sector has been high, almost forty percent as compared to 2011 figures which have slowed down by the first half of the year. There are industries that are plagued by overcapacity as well as businesses that are apprehensive of the future and are hoarding cash instead of investing further. Investment spending by the state has increased and doubled, as per the pace found in 2011. The government has definitely put in a major thrust for the Chinese economy.

Summarizing the situation

What the Chinese government has been doing might not be right to criticize. The government definitely has the fiscal capacity by which it can support the growth of the economy. The government is investing in sewage systems, subway outlays, housing development and others which are needed for the future and are propelling growth for the year as well. Some experts state that this kind of growth led by the government is not sustainable. The companies that are state owned are indebted and they run less efficiently than private sector companies. Hence, such companies investing in state investments are not a sustainable proposition. Many bankers in the economy state that, this kind of growth will prove more costly and less profitable for the economy in the long run.

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