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Cold winter ahead for China's economy?

(China Youth Daily)

16:45, October 25, 2011

Edited and Translated by People's Daily Online

Now that the U.S. sovereign credit rating has been downgraded for the first time, and the Greek debt crisis has reared its head again, the global economy has dropped quickly to a freezing point as well. Once again, the U.S. and European media have started to discuss whether China will save the world.

The problem is China has its own difficulties.

Three engines of China‘s economy slowing

Because of the emerging effects of China's domestic macroeconomic readjustment and control and the turbulence of the global economy, the three engines driving China's economy — investment, consumption and import-export — have all slowed. It has become a common view in the academic circle that China's economic growth is being restrained.

Since the beginning of 2011, China's monetary policies have been tight and will not be loosened in the short term. The credit environment for investment is becoming severer and local governments' financing abilities have been limited. China will not invest in infrastructure constructions on a large scale like it did two years ago. Meanwhile, the cost of private loans continues to rise, which is limiting private investment. And investment in individual business has already begun to falter.

Price level is still high

China's economic growth is losing its speed, but China's price level is still very high. China's Consumer Price Index (CPI) has been rising month-by-month since the beginning of 2001 and reached as high as 6.5 percent in July. The CPI of August 2011 increased by 6.2 percent compared to that of the same month of 2010. Although the year-on-year growth rate saw a small decrease, it still grew compared to that of July 2011, and if the carryover effect is not counted, the year-on-year growth rate was positive too. The core reason for high prices is the increasing price of food.

Turning point coming for real estate market

A series of real estate readjustment and control polices, such as purchase restrictions, loan limitation and financial deflation, have been implemented in China, and up to now, the trading volume in the real estate market has slowed down and the housing price level is also shaking too. The market is quite gloomy now. It is expected that both the housing trade volume and housing price will decrease in the fourth quarter, but will not decrease much.

From both the economic situation and the real estate market situation, it could be seen that the real estate readjustment and control policies will not be loosened, and they should not be loosened.


Leave your comment7 comments

  1. Name

Pan Asian at 2011-10-26220.255.2.*
Yes, America has proven many times before that it will rebound and be a stronger nation, but at whose nations' expense. Start World War 3 or more Quantitative Easing ver. 3 (printing money like mad) by the US on the pipeline??? Hope China will not be cowed like Uncle Sam's japanese poodle that appreciate his yen to new highs, imports of suspect tainted mad cow beef, self imposed quotas on his exports to US and Europe in the 80s and early 90s and withholding cash out of her US treasury bonds holdings.
Pan Asian at 2011-10-26220.255.2.*
In total agreement with wende that charity begins at home. Through a non- Chinese, found the Chinese bureaucrats have a fondness of throwing money sparingly around in the globe to shore up their personal legacies. When the West sent aid, it always come attached with conditions with expectations of political and economic returns from the receiving countries, which unlike the Chinese bureaucrats who practise cheque book diplomacy with zero returns because of the blundering non interference policy. Remembered watching a past CCTV program on the plight of primary school children in a small Yunnan provincial town, whose daily 3 meals diet in the hostel consists nothing but steamed soya beans with rice or in better days with a little pig lard added. These children are of the growing age, which in need of healthy nutrient foods to help them to grow to their full potential. And as for accommodation, approx 3 to 4 children have to share a single wooden hard prank bed. Now, tell me who should China help first, the lazy pot-belly Europeans, who live beyond their very own means or the millions of needy Chinese living in the inland provinces? Even UK petty criminals serving their prison sentence got a better deal from their government with paid holidays aboard, special thanks to their generous welfare funding.
Robert at 2011-10-26122.61.183.*
China"s Labour costs have also been rising which will be good and bad for China. Good for people who will have money money to bu things but not so good as companies looking to save money go to other countries
ood at 2011-10-26120.165.30.*
Very funny, those western countries have always thought that they are smarter , now it can only beg for assistance to China to solve its debt problem, really very embarrassing.
Observer at 2011-10-26222.127.174.*
The mettle of a nation is not measured in its good times but rather in its bad times. America, as it has proven many times before, will rebound and will be a stronger nation than before. Will China be able to do the same is the question on everyone"s mind.

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