China’s red hot growth continues
China's economy expanded by 10.7% in 2006, topping the 10.4% growth recorded a year earlier and marking the fastest growth since 1995 and fourth consecutive year of double digit growth. The stronger-than-expected growth was largely fuelled by booming exports, stronger retail sales, a manufacturing boom and huge investments in new buildings, roads and cities. There are concerns that the blistering pace of growth may be unsustainable. Government has taken a series of measures to cool the economy like raising interest rates and pressuring banks to temper lending. Given the continued growth, further interest rate hikes may be on the cards. Slowing down over-investment in certain sectors of the economy like real estate and preventing stock market bubble are major challenges which the Chinese economy has been grappling with. China is also under intense pressure to allow its currency to appreciate more quickly against the dollar in the hopes of easing the country's mammoth trade surplus with the United States. The Yuan has been steadily appreciating against the dollar, strengthening to 7.77 yuan to the dollar from 8.26 in 2005. Besides the economic challenges, the enormous economic growth has also given rise to growing inequality and simmering social unrest.
China's economy expanded by 10.7% in 2006, topping the 10.4% growth recorded a year earlier and marking the fastest growth since 1995 and fourth consecutive year of double digit growth. The stronger-than-expected growth was largely fuelled by booming exports, stronger retail sales, a manufacturing boom and huge investments in new buildings, roads and cities. There are concerns that the blistering pace of growth may be unsustainable. Government has taken a series of measures to cool the economy like raising interest rates and pressuring banks to temper lending. Given the continued growth, further interest rate hikes may be on the cards. Slowing down over-investment in certain sectors of the economy like real estate and preventing stock market bubble are major challenges which the Chinese economy has been grappling with. China is also under intense pressure to allow its currency to appreciate more quickly against the dollar in the hopes of easing the country's mammoth trade surplus with the United States. The Yuan has been steadily appreciating against the dollar, strengthening to 7.77 yuan to the dollar from 8.26 in 2005. Besides the economic challenges, the enormous economic growth has also given rise to growing inequality and simmering social unrest.
5 comments:
Quite good comment I have to say... do not forget about the level of bad loans part of all these chinese banks.
I believe this is a clue about why it would dangerous for China to appreciate their currency.
Thanks for your opinion.
Yes, you are right. The huge burden of bad loans coupled with the old generation 'management practices' at Chinese banks are among the weak spots of the economy.
And, that's why the government is pouring huge sums of money to cleanse the books of the larger banks and then taking them public. Bank of China, China Construction Bank, ICBC and now Agriculture Bank ! Listing will definitely bring in better transparency and market discipline.
but listing of major companies, has already happened, right ? I mean, it is all about A shares and B shares. I guess one has to be more transparent than the other... ?
China and India are on an economic roll- hindi chini bhai bhai. Your last lines are bang on target- pullitzer prize winning book "The World is Flat" says the same thing. Check out the second last post on my blog if interested.
Well said.
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