Sunday, April 13, 2014

The Great Dragon of Asia is Falling?

  China as one of the leading economy powerhouse has risen drastically over the decades, turning their ploughing fields into mega-cities, but can they keep it up? The country main revenue which is exportation of products seems to be falling quite drastically. As in last month, the country seem to have a decreased of 6.6% while on February they also have a drop of 18.1% making a total drop of 24,7% of export this year. 

Data shows that the dropped of export in February was caused by the Lunar New Year holiday period, which caused the factory to momentarily close down, at the time, it was predicted, by march, that the economy will increase in both export and import, but the fact is when the time comes, it shocked them to see that the trade figure shows sign of weakness amidst it poor data from the manufacturing and retail sector. The World Bank trimmed its growth forecast for China to 7.6% for this year from its earlier forecast of 7.7%. The latest trade data leaves China with a trade surplus of $7.7bn (£4.6bn) in March, a turnaround from a deficit of $23bn in February. 

Since 2009, trillions of Chinese renminbi have been lent by state-controlled banks to local government-sponsored infrastructure companies to fund questionable projects, most of which failed. And as credit growth weakened over the couple of years, the weakness China's economy has become apparent. Because their use of credit is like steroids on the body of an athlete, eventually they’ll need ever larger injections to maintain the effect. 

“It’s difficult to see Chinese consumption soaring at a time when the property bubble is deflating and construction jobs are being lost. The darkest cloud hanging over China, however, remains public corruption. Members of the governing Communist Party have used the recent era of rapid growth to amass what can only be described as dynastic fortunes. The imbalances of China's economy are not accidental but the result of this corrupt polity. Infrastructure is ripe for plundering by corrupt officials. A series of scandals have drawn welcome attention to this endemic problem which poses the greatest threat to China's long-term economic prospects.” - Edward Chancellor; Global strategist at GMO

But The Great Dragon not going to let itself fall to the ground just yet, last week, they unveiled a a mini-stimulus package to boost growth, which included more spending on rail infrastructure and tax breaks for small businesses, which, if go as planned, will increase the trade growth by 7,5%. But how this plan will fare, is anybody’s guess.


Posted By
Achmad Rizky Aditiya Witjaksono Muwardi Az (Jack)

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