Why China’s economy is reminding of Japan
Chinese policy-makers hoped that China would soon overtake the US. But it doesn’t seem possible at the moment. At present, America is the largest economy in the world while China is at number two. According to a Reuters report, Desmond Lackman, senior fellow at the American Enterprise Institute, said that China is unlikely to overtake the US in the next one to two decades. He says that the growth in China will slow down to three percent, which is like getting stuck in an economic recession. The unemployment rate in the country has crossed 20 percent. This is also not a good thing for the global economy.
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China’s economy grew at 6.3 percent in the second quarter, but far less than expected. China’s annual average growth in the last decade was seven percent and in the 2000s it was 10 percent. Many reasons are being considered for the sluggishness in the country’s economy. The biggest reason for this is the crisis in the real estate sector. Along with this, the imbalance in investment and consumption, huge increase in government debt and tight control of the government on society and business are also responsible for this. The country’s workforce and consumer base are shrinking while the number of retirees is rising.
Experts say that China’s problems are more challenging than Japan’s. The problem is that people and companies in China are paying down debt instead of taking loans and investing. This starts the depression. Stimulus needs to be given to get out of this problem, but at the moment it does not seem to be happening. Recently, infrastructure investment in the country has increased debt rather than growth. Big countries around the world are trying to reduce their dependence on China. But instead of solving the issue, China is entangling them with them. Whenever America makes an announcement against China, China also takes immediate action. China should understand that America is not a middle income economy.
