From A Economical Stand Point, Will China’s Economy Collapse Because It Is Growing To Fast?
Posted by China Sourcing CommentatorOct 3
No I don’t think so.
Because China is big and strong enough to gulp down all this growth.
The per capita GDP of China is not that much and will take decades to reach the top per capita GDP countries of the world.
The government in China is very stable. They have only one party this is undemocratic but is very useful in implementing long term policies.
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How can a economy collapse because it is growing so fast. On the other hand their political system will because the more they make brings political corruption and embezzling. That is what happened to Russia.
It won’t collapse.
The general worry is this: China currently fixes their exchange rate (within a tight band) and controls capital flows to their country.
This means it is very difficult (in theory, impossible), for them to control their own interest rate.
Interest rates are a central bank’s primary tool to control inflation.
Fast growing economies are in danger of inflation.
You do the math….
There is a possibility that it will implode meaning that their inflation rate will highly likely rise because of a budding upper class. The communist system is allowing more free and private enterprise and once supplies increase, demand will increase (and the means to pay for consumer goods), and so prices will rise. Also, China is making moves in to Africa to widen their trade programs. Their economy is booming at a faster rate than imagined and in order to keep it going they need widen their markets. If they don’t find new consumers worldwide their economy will be forced into a recession. Added with inflation, they will suffer stagflation.
This is one subject I like to keep on eye on and while there are no exact answers, Time magazine has given several possibilities on the future of China’s economy.
1. China will reach a level of environmental damage and resource depletion that will cause its economy to become stagnant after its rapid growth, after which it will continue to grow at a more moderate rate.
2. A second farmers revolution will occur causing the communist party to lose power, with that a capitalist government (most likely sponsored by the U.S. or U.N.) will assume power after rebuilding the infrastructure of the country even greater economic growth will occur until it hits a saturation point and levels off.
3. China’s government will continue to create economic reforms, moving slowly towards capitalism. This will mean a much longer progression a healthy stable and slow growing economy.
Personally, I believe #1 is the most likely scenario, as China is reaching a level of environmental damage with such things potable water and air quality, that they will be forced to slow their economic growth.
You need to understand the Chinese mindset. In a recent, poll Chinese people were found to be the most “pro-market” nation in the world. However, social norms and environmental standards are so low that we might wonder how this growth is sustainable. Actually, I think that as long as market forces remain compabtible with an absence of social consciousness of the damaged caused by the growth (Asian people are very submissive), the economy will continue to experience two digit growth rates…