It seems that China's economy has been involved in some trouble. Whats more, for the whole world this may be a bigger trouble, unless the leaders of China and its trading partners can ensure that the economic pressure that the largest exporting country in the world is facing would not result in trade confrontation in the world.
Real estate bubble in China seems to be likely to burst and steel production falls as the reduction in the demand for new housing construction has dropped. As the real estate developers face difficulties, this also endangers the Bank. The Chinese Government has already started cutting off credit to slow the increase of bubbles, but it suddenly changed the course, announcing that it will lower the deposit reserve rate for the first time since 2008. The most important thing is that foreign demand for Chinese exports has decreased.
Economic hard landing in China will have immediate effects on Russia, Brazil and other countries. The exports of steel, wood and other goods from these countries have once created a construction boom in China. The world economy will also be affected because China is the only driving engine of the growth of world economic.But the even greater danger is the possible outbreak of a trade war. Chinese leaders are keen to hold hegemony by their growing economy, which could cause them to prefer Neighboring gully strategy, as well as to subsidize exports by means of destroying the fragile world economy. The world economy has been suffering the continuous impact of European debt crisis.
Worrying signs show that Beijing is going in a wrong way. Earlier, China has decided to impose anti-dumping duties and countervailing duties on the SUVs made in the United States. Because these cars are sold in small volume in China, the impact of these duties is minimal, but analysts have seen such a move seen as retaliation against Washington. The cause is the United States fight against China's subsidized exports. At the same time, the pace of appreciation of RMB also significantly slows down.
The Obama administration must also proceed with caution. It is reasonable to fight against illegal trading practices which includes to suit to the WTO for China's illegal subsidies for solar energy. But there should be multilateral action, including calling for other countries to put pressure on Beijing to promote compliance with its provisions. Unilateral actions, such as the punitive measure that the Congress maintains low exchange rate can only do more harm than good. However, China should make some response. China has many better options, including a reasonable stimulus as investing in low-income housing and the expansion of Government-run health insurance. These measures will boost consumer spending and economic growth, reducing China's dependence on export markets and investment bubbles. Such a policy change would stimulate world economic growth.
Real estate bubble in China seems to be likely to burst and steel production falls as the reduction in the demand for new housing construction has dropped. As the real estate developers face difficulties, this also endangers the Bank. The Chinese Government has already started cutting off credit to slow the increase of bubbles, but it suddenly changed the course, announcing that it will lower the deposit reserve rate for the first time since 2008. The most important thing is that foreign demand for Chinese exports has decreased.
Economic hard landing in China will have immediate effects on Russia, Brazil and other countries. The exports of steel, wood and other goods from these countries have once created a construction boom in China. The world economy will also be affected because China is the only driving engine of the growth of world economic.But the even greater danger is the possible outbreak of a trade war. Chinese leaders are keen to hold hegemony by their growing economy, which could cause them to prefer Neighboring gully strategy, as well as to subsidize exports by means of destroying the fragile world economy. The world economy has been suffering the continuous impact of European debt crisis.
Worrying signs show that Beijing is going in a wrong way. Earlier, China has decided to impose anti-dumping duties and countervailing duties on the SUVs made in the United States. Because these cars are sold in small volume in China, the impact of these duties is minimal, but analysts have seen such a move seen as retaliation against Washington. The cause is the United States fight against China's subsidized exports. At the same time, the pace of appreciation of RMB also significantly slows down.
The Obama administration must also proceed with caution. It is reasonable to fight against illegal trading practices which includes to suit to the WTO for China's illegal subsidies for solar energy. But there should be multilateral action, including calling for other countries to put pressure on Beijing to promote compliance with its provisions. Unilateral actions, such as the punitive measure that the Congress maintains low exchange rate can only do more harm than good. However, China should make some response. China has many better options, including a reasonable stimulus as investing in low-income housing and the expansion of Government-run health insurance. These measures will boost consumer spending and economic growth, reducing China's dependence on export markets and investment bubbles. Such a policy change would stimulate world economic growth.
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