China Economic Growth Sustainability

China Economic Growth Sustainability

Introduction

Improvement of global economic condition and outlook is highly dependent upon the sustainability of the Chinese economic growth and development. Many researchers believe that China's current producer biased model of growth and development cannot be sustained for very long and may collapse in the coming future. There is no mention of exact timeframe as to when this will turn into a failure but it has been suggested by many experts that if China did not undertake and implement ambitious economic changes and reforms, it would result in slow performance in terms of output, increased corporate default, stress on the banking sectors and social unrest. This is not going to hurt only Chinese economy but will also bring significant spillovers in the global economic situation. On the other hand if serious measures improvement in the current economic situation will be undertaken such as restructuring of economy will result in robust long term growth that will less volatile. This will also result in stable monetary and financial inclusion of China in the global economy with provision for international monetary system, especially the Euro region. The export let strategy of China has been challenged by many politicians and experts from the western world and china. They believe that Chinese economic growth is unsustainable and unbalance due to its heavy reliance on external demand, manufacturing and investment. On the other hand some suggest that china still possess a good chance of economic growth due to its low labour cost which will continue to be there for the next 30 years (Zhang, pp. 26).

Discussion

Global Financial Crisis

It has been analyzed that financial crisis in global village has affected the rapid growth in China in the past several years. The GDP growth is expected fall to 7.5 percent after stable and average growth of 10 percent during the era of 1980-2000. This sudden decrease and slowdown in GDP growth has been related to China's high dependence on exports to the developed and advanced countries and economies. China has reached its peak and highest point in relation to opening up its door to foreign investors and businesses in order to become more competitive and market oriented. But his dependency of GDP growth on exports to advanced economies is risky in the long run. There is a negative side to this increased global demand for Chinese products due to which the Chinese authorities are more interested in rebalancing the growth of economy towards domestic demand through increased private consumption. They have taken steps to improved consumption and increase the required investment in Chinese infrastructure and also reduce the saving pattern of the household that they undertake as a precautionary measure. As stated by an expert "The biggest problem with China's economy is that the growth is unstable, unbalanced, uncoordinated, and unsustainable"(Dorucci etal, 2013). The global financial crisis gave rise to the pessimistic view with regards to china being an export led economy. This view also became popular with the appreciation of renminbi (RMB) which ...