Friday, September 13, 2013

Doubts Rise as China Touts Upturn

Friday Sep 13

As China reports a mass turnaround in their economy, there are some doubts how will the Chinese Government would handles the Micro-economic and how will effect them.?

It seems according to some economists that China could do a lot of differences in today's economy whether its globally or locally, hence China does not depend on export abroad and credit-flue investment in large infrastructures at home!. Seriously even though if they have good exporting they should not stop relying on such huge income that comes from most countries in the world.

Recently, Chinas industrial output came form heavy industries (steel, iron, etc..) plus electrical production and exports have posted a magnificent gains.

"When the economy is slowing, using a short-term stimulus to boost growth is one method, but we think that doesn't help solve deep-seated problems," said Chinese Premier Li Keqiang, speaking at the World Economic Forum in Dalian on Wednesday. "So we chose a strategy that is good for today, and has long-term benefits, maintaining stability of macroeconomic policy." (WSJ)

The strategy that Chinese premier LI Keqiang, talking about works with the short-term growth, but how about long term MR. Premier?

Good part of it, you are enhancing investment in different areas such (IT, and energy efficient). Notably, that massive spending in short-term have helped growth.

On the other hand, China is soaked with its own credit boom. Central bank seeking to low and cut excess on lending.

"China's total lending has risen to close to 200% of gross domestic product this year, up from around 125% in 2008"(WSJ). Moreover, they are using the loan to re-cycle the existing loans, which means they can not pay it. Instead, of financing their business!.

From the chart above, in the far left graph China has met a grow of %7.6 but that wont stand for long and dropped to lower than %7.5, which is the government annual target!
The graph in the middle shows how the investment increased because of the government boosting in that part, whereas the household dropped and exporter declined as well.

Despite that, the global economy improved a little, giving that credit to China exports, which would add 3-4 per cent to china exports. But still Chinese exports unstable to make such investment that can add something to the growth. Plus, "Angela Tu, chairman of Xinpeng International Co, a shoe exporter in Wenzhou, says sales are up about 10% from last year, but the company doesn't plan to expand. "Right now, our priority is to be stable and cut down expenditures and lay off workers if necessary." 


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