Friday, April 20, 2007

China Economic Growth Breaks records

The latest economic growth statistics show the Chinese economy is growing at an unprecedented rate of over 11%. There are also increasingly signs of over heating as Chinese inflation increases to 3.3%. There are concerns that this level of economic growth is unsustainable and will lead to a potential boom and bust economic cycle.
In response the Chinese government may be forced to:

  • Increase interest rates
  • Allow an appreciation in the exchange rate.

Both of these will help to slowdown the economy.

However despite growth rates in double figures there are concerns that there are still significant problems with the Chinese economy.

1. Growing levels of inequality between south (manufacturing, urban) and the north (agricultural sector - rural)

2. Continuing levels of unemployment created by the privatisation of previously inefficient state owned enterprises

No comments: