The Chinese economy has lived up to its reputation of being the world’s fastest growing -latest figures show that it steamed ahead by 10.7 percent last year. That puts its expansion rate at more than twice the global average. But Beijing is worried that such high levels of growth may be unsustainable and plans to take several more measures to slow things down a bit.
Over the last few years it has been a story of the up and up, putting the US and Europe in the shade. Analysts forecast there is a good chance, China’s GDP will overtake Germany this year and it is just a matter of time before it passes Japan.
The success story has produced a massive trade surplus, stimulating lending and investment. Low wages and a good infrastructure have brought in foreign firms which then export their products. The problem for the government is how to boost domestic consumption thereby stabilising the rapid economic growth.
China’s exports, which rose 27 percent last year, are cheap because the country’s currency is kept weak, but there is a risk of protectionist action. Cutting taxes, increasing the minimum wage and raising welfare benefits should boost internal demand, taking the pressure off the trade surplus. But all this frenetic economic activity comes with a warning – enormous amounts of pollution. Observers point to the lack of regulation over factory production, allowing them to pollute with impunity. The long term environmental effects of the Chinese boom are yet to be assessed.