An article from CNN highlights the
recent third quarter growth results for China and evaluates its ability to keep
up their goals for growth. China’s economy expanded 6.8% in the third quarter
which is the number economic forecasters expected for the world’s second
largest economy. China’s annual target growth for 2017 is 6.5% or higher and
looks to be on track to reaching that goal. However, many experts have had
doubts about the accuracy of the country’s data. The stable growth numbers seem
to be masking the heavy debt burden that Chinese companies carry. The Chinese
president has stressed the importance of cutting levels of debt, but there are
many skeptics on ability for China to get this done. Many experts expect that
Chinese growth to slow in the coming years. As we learned in class, this is a
natural thing for economies to do as they begin to reach the steady-state.
http://money.cnn.com/2017/10/18/news/economy/china-economy-third-quarter-growth-gdp/index.html
I agree that the growth will slow down in coming years because when it reaches the steady-state it will reach its equilibrium and therefore won’t be able to grow any more. The only way it can continue to grow, is if you increase the total factor productivity. To increase the total factor productivity China will have to increase capital and labor, but since they have a huge debt this may be harder for the Chinese economy to keep growing. They will first need to repay some of the debt before they can start to grow again. Overall China will have a little effect on the world interest rate.
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