Economics: Still Rolling: China\'s GDP

¶ … Economics: Still Rolling: China's GDP Hits 8.7%

Still rolling… (Song Shengxia and An Baije, 2010) focuses on the state of the Chinese economy in a context in which 2009 was a difficult year for most global economies. China however managed to capitalize on its protectionist policies and its production and export capabilities and as such maintain a positive growth trend. Still, in their attempts to minimize the negative impact of the internationalized financial crisis, the Chinese banking sector granted more loans than normally, creating as such a risky situation of massive debt -- the very core of the current economic crisis. Aside increasing debt levels, future problems could also be posed by overproduction and incremental inflationary levels.

Yet, these are just potential threats, and one should praise the Chinese economy for making such an astonishing recovery in times of global financial crisis. 2009 did not commence in the most positive manner for the Chinese economy, especially as the growth in the gross domestic product for the first quarter (6.1%) was significantly below the target imposed by the federal authorities (8%). The growth rates of the following quarters were of 7.9%, 8.9% and 10.7%. The trend is revealed throughout the chart below:

At this stage of the article analysis, it has to be noted that the piece is not the easiest one to read for the inexperienced reader. It assumes that the individual possesses sufficient economics background and does not introduce him to the core of the issue, but to a specific item. Probably the most relevant example in this sense is the factual and statistical discussion about the Chinese national output. Shengxia and Baije present the figures for 2009, but do not reveal the national trend in the Chinese GDP throughout the past years, with the intent of presenting the context. Yet, since this is necessary, the chart below reveals the evolution of the Chinese GDP throughout the past decade:

While it is clear that the article is intended for individuals with an economic background, it is also true that the topic is interesting and could attract the general public, but this general public would have difficulties understanding the terminology and the actual situation and implications, since they do not have knowledge of the actual context.

Shengxia and Baije present the growing Chinese GDP from yet another angle -- that of the regional role it played. By proving its stability, China created a favorable context for the other Asian countries, which were able to maintain their exports to the western regions of the globe. Additionally, the authors argue that the increase in Chinese output allowed the trade balance with the United States of America to gain more equilibrium. Once again however, Shengxia and Baije do not explain their arguments nor do they show exactly how the Chinese GDP evened out the trade balance with the U.S., nor how it supported the economy of its regional neighbors.

In terms of the elements threatening the future stability of the country and its economy, the authors point out that the Chinese authorities have been quick to identify these threats; they will as such address them in an efficient manner. They will for instance instate regulations capping the levels of loans to be granted to the population with the specific aim of reducing inflation and over-consumption. Examples of such measures include the limitation of the bank loans to a 7.5 million Yuan for the year, and a rumored 0.27% increase in the interest rates. At this stage, it is however unclear what exact measures the officials will take, and if these are drawn from the experience of the United States and other countries in their own dealing with the crisis, or whether they are tailored to the unique characteristics of the Chinese market place. What is however certain is that these limitations will raise difficulties in the path of a free market growth. The capping of the loans will for instance reduce investment opportunities and will as such reduce not only borrowings and debt, but economic growth.

Additionally, there is talk about reducing the current levels of production, with the intent of not creating overproduction and the adjacent waste of resources (commodities, labor force and capitals). Yet, the downside would be that of job loss, with the indubitable incremental unemployment rates and decreasing living standards for the population. Still, it should be noted that these negative impacts would only be felt on the short-term, but will generate the undeniable impact of sustainable and stable growth for the future.