The 2010s - A lost, instead of blossoming decade for China? Essay

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The financial crisis in 2008, having resulted from a tremendous bubble in the real estate market as well as highly leveraged banks and governments, has now become a debt crisis and is still an important in political discussions worldwide. Numerous employees have lost their jobs, many companies went bankrupt; nevertheless, there seemed to be one country that stroke off all difficulties and continued growing at an outstanding rate. In 2009 China’s GDP grew by 9% (www.cia.gov), while all other economies faced severe recessions. For many economists, China is an example for superior economic growth despite state-controlled industries and only limited opening of the market. But recently the number of critics has been increasing and there is much…show more content…
In the case of South Korea it did when major corporations began to file bankruptcy and its result was a 34% fall in GNP within one year (www.wikipedia.com). If China will continue its path of subsidizing state-owned companies and shutting out foreign competition it could soon face equally severe problems.
Another argument supporting the theory that a Chinese economic crisis is inevitable is the enormous number of investments China has made in recent years. Currently China’s investment-to-GDP ratio accounts for 46%, which is extraordinarily high, even for Asian standards (www.business.time.com) Often the Chinese government utilized huge amounts of public and private money for economically inefficient projects, such as the high-speed railway linking Shanghai to Suzhou and Nanjing, which the average Shanghai citizen cannot even afford a ticket for. Additional investments benefitted the real estate development, which is the key driving factor of China’s economic growth. Chinese megacities face an enormous shortage of affordable housing for the average citizens; meanwhile numerous high-end apartments for the wealthy upper class are built. An additional problem with China’s enormous amount of investments is its financing. The bank credit in 2011 was estimated to be 185% of the GDP, which accounted for approximately $1,7 trillion that the banks owed the government. Recent requests from local governments for the banks to roll over the loans (www.ft.com) show

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