China’s property and manufacturing sectors slide further
this month. Now the Chinese Leaders are faced with a tough decision on whether
to accept this economic slowdown or stimulate the economy at the risk of
creating long-term problems.
The economy is showing many signs of sharp slowdowns. Manufacturing,
which accounts for almost half of China’s economy, has slowed down greatly over
the last few months. Domestic economic activity has slowed down since the
beginning of 2014. Real estate is also showing signs of slowdown. This weaken economy is adding to concerns
that China will not reach its government-set economic growth target for first
time in 16 years.
Housing is a particular problem for China. "Signs are
mounting that the housing market in a number of cities is not just cooling but
actually cracking," said Wei Yao, an economist. China is producing more residential
property than it really needs.
I think China is deliberately slowing the growth rate down. Based on the information from China's annual parliamentary session, China set the lower growth target and inflation target. The also aimed at real estate to prevent property bubble. So I don't think it is a tough choice for Chinese leaders. Maybe this is their expectation.
ReplyDeleteI agree with Xiaoshu that China is deliberately slowing the growth rate. It would be smart to do so, because they need to target possible inflation and also bubbles that could be emerging in the real estate market. However, I agree with the notion that this is not an hard choice. There can be very serious and negative consequences for slowing the growth. First, there will be millions of people harmed by this decision, because slowing the economy could also decrease employment. If more people are feeling the burden of a slower economy, there could be a decrease in consumer sentiment, and people are more likely to protest against government policies. Furthermore, China has to deal with a lot of corruption from encouraging slower growth. By discouraging higher growth, there will be administrative officials who are mad that there is less money being spent in the economy. This is usually because of the fact that the increase in growth allows for increases in their own salaries. If China wants to target economic growth in this rate, it will have to address corrupted officials that will disagree with this policy.
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