Arab Today, arab today cracks appear in china\s economic model
Last Updated : GMT 05:13:31
Arab Today, arab today
Arab Today, arab today

Cracks appear in China\'s economic model

Arab Today, arab today

Arab Today, arab today Cracks appear in China\'s economic model

Beijing - AFP

As the United States and Europe struggle with debt crises, China\'s economy appears in robust health, but analysts say its growth model is too dependent on investment and cannot be sustained. Sitting on foreign exchange reserves worth nearly $3.2 trillion and with breakneck growth of 9.5 percent in the second quarter, the world\'s second largest economy appears to have breezed through the global financial crisis. \"Clearly China is becoming a larger percentage of the world economy and its growth rate is higher than the developed world,\" said Fraser Howie, co-author of \"Red Capitalism: the Fragile Financial Foundation of China\'s Extraordinary Rise\". \"It is becoming stronger as a result of that but I would argue that much of that strength is misleading,\" he told AFP. When the global economic crisis hit its huge export industry in 2008-9, China unleashed a torrent of credit to finance new highways, high-speed railways and real-estate projects, in a bid to stimulate domestic demand. Now, experts warn China\'s growth has become too reliant on investment. \"If you look at infrastructure projects, it is very clear that the banks have looked at them as risk-free lending because they\'re guaranteed by the government,\" said Patrick Chovanec, associate professor at Beijing\'s Tsinghua University. \"It does create growth but it also creates big problems down the road in terms of bad debt.\" China\'s state auditor said last month that local governments held a massive 10.7 trillion yuan ($1.65 trillion) in debt at the end of 2010, warning there was a risk some might default. Several days later, global ratings agency Moody\'s said authorities may have understated that debt burden by as much as $541.6 billion, adding the proportion of bad loans could be higher than previously forecast. \"The problem is not really what took place in 2009 and (China\'s) initial response to the global financial crisis, the problem is that in 2010 and continuing on into this year, it became the new normal,\" said Chovanec. \"It became the new growth model, but it is not a sustainable growth model,\" he added. Spooked by inflation, which hit a three-year high of 6.4 percent in June, China has been trying to stem the flood of credit by hiking interest rates, amid fears rising prices could cause social unrest. It has also increased the amount of money banks must set aside several times. But Michael Pettis, professor at Peking University\'s Guanghua School of Management, believes that \"China\'s growth has become so unbalanced that it is going to be extremely difficult for it to change to a new growth model\". The government has stipulated in its new five-year economic blueprint that it wants consumption to play a bigger role in growth, by increasing people\'s purchasing power and further developing services and social security. But month after month, economic indicators show that investment and exports still continue to rise faster than consumption. \"It will prove very difficult for China to grow without maintaining high levels of investment, but these high levels will guarantee an unsustainable increase in debt,\" Pettis said. The government does have powerful levers in its possession to adjust the direction of its economy. For instance, it controls the majority of large companies in the country. As such, state-owned enterprises (SOEs) have better access to credit. But for many economists, this is a poor allocation of resources as the more competitive private sector is the main source of employment in China. \"We know that the SOEs are a lot more powerful than they used to be,\" said Richard McGregor, author of \"The Party: The Secret World of China\'s Communist Rulers.\" \"The state has become momentarily stronger, but I\'m not sure that\'s a lasting phenomenon.\" Analysts doubt that China, faced with a new debt crisis in the developed world, will be able to implement the same measures it did in the 2008 international financial crisis. \"Can China do the same again this time? Well, yes, it could -- more cheap money flooding the system to build unproductive things,\" said Howie. \"But ultimately that is a waste of resources and the model will eventually fail.\"

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today cracks appear in china\s economic model Arab Today, arab today cracks appear in china\s economic model

 



Arab Today, arab today
Arab Today, arab today Hats, scarves add beauty to women

GMT 19:10 2017 Friday ,17 February

Hats, scarves add beauty to women
Arab Today, arab today Tourist guide reveals methods of tourist attractions

GMT 17:46 2017 Saturday ,18 February

Tourist guide reveals methods of tourist attractions
Arab Today, arab today To release new antiques collection

GMT 20:33 2017 Friday ,17 February

To release new antiques collection
Arab Today, arab today Leader Omar Abdel Rahman dies in US prison

GMT 19:00 2017 Sunday ,19 February

Leader Omar Abdel Rahman dies in US prison
Arab Today, arab today Murder of 2 reporters in Dominican Republic

GMT 22:45 2017 Thursday ,16 February

Murder of 2 reporters in Dominican Republic

GMT 05:57 2017 Sunday ,19 February

How do you say déjà vu in Greek?

GMT 05:26 2017 Sunday ,19 February

US natural gas market tightens

GMT 05:06 2017 Sunday ,19 February

Merkel: Euro is too low for Germany

GMT 04:58 2017 Sunday ,19 February

Swedish PM: Brexit deal in 2 years is unlikely

GMT 20:02 2017 Saturday ,18 February

Gold edges higher as global equities lose momentum
View News in Arabic - Business: نفط وبتروكيماويات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Kidogo provides childcare for underserved

GMT 20:24 2017 Wednesday ,15 February

Kidogo provides childcare for underserved
Arab Today, arab today Tragic fluctuations of Bakhtiari's life revealed

GMT 06:50 2017 Wednesday ,15 February

Tragic fluctuations of Bakhtiari's life revealed
Arab Today, arab today London to tax old cars

GMT 14:06 2017 Friday ,17 February

London to tax old cars
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today Competes Sweden and Germans by S90

GMT 22:36 2017 Thursday ,16 February

Competes Sweden and Germans by S90
Arab Today, arab today Porsche reveals new 2018 Panamera

GMT 17:31 2017 Wednesday ,15 February

Porsche reveals new 2018 Panamera
Arab Today, arab today Actress Nadeen Al Rassi views art as her entity

GMT 07:30 2017 Saturday ,18 February

Actress Nadeen Al Rassi views art as her entity
Arab Today, arab today Teach monkeys to recognize themselves in mirror

GMT 20:41 2017 Wednesday ,15 February

Teach monkeys to recognize themselves in mirror

GMT 07:05 2017 Friday ,17 February

Singer Diana Karzon will issue a new album soon

GMT 06:40 2017 Friday ,10 February

MP calls for removing text from Islamic story

GMT 13:16 2017 Tuesday ,14 February

First fashion model with Down syndrome

GMT 10:26 2017 Tuesday ,14 February

Emergency UN meeting in Harare

GMT 14:04 2017 Tuesday ,14 February

"Lagom" new Swedish concept in interior design

GMT 12:07 2017 Thursday ,16 February

Bite-mimicking malaria vaccine

GMT 09:03 2017 Thursday ,16 February

Tour guide praises women’s beaches

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 21:42 2017 Sunday ,12 February

Rania al-Ghazali designs candles of bubbles
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday