BEIJING SURPRISE: CHINA’S GROWTH
19, Apr 2019
Prelims level : Economics Mains level : GS-II Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management
Why in News?
- The Chinese economy has grown faster than expected, but concerns over stimulus remain
- China’s economy is showing signs of a rebound.
- According to figures released by its National Bureau of Statistics on Wednesday, the Chinese economy grew at 6.4% in the first quarter of the current year compared to the same period last year.
- The latest growth figure is seen as a sign that the Chinese government’s efforts over the last few quarters to stimulate what is the world’s second largest economy are beginning to have a positive effect
- With trade tensions with the United States subsiding significantly for now, export growth may accelerate, further boosting the Chinese economy.
- The Chinese stock market has also been buoyed by the early signs of an economic turnaround and increased liquidity, with the CSI 300 index rising by over a third in value since the beginning of the year.
- Gross domestic product growth that is generated largely by increased lending, however, poses the risk of losing momentum once the stimulus is withdrawn.
- Chinese authorities may eventually be forced to crack down on exuberant lending by banks when the economy is found to be overheating.
- It was such a crackdown that contributed to the fall in property prices in the last few years. For now, though, property prices have begun to rebound after restrictions on the real estate sector were eased lately, in an attempt to stimulate growth in the economy.
- Such macroeconomic policy, focussed too narrowly on the short term while ignoring the long-term consequences, however, does not bode well for either the Chinese economy or the wider global economy.