China is seeing an economic crisis due to several factors, including cheaper precious metals, insufficient transparency of the communist economy and construction boom. Once known for its strong economic growth, China is now showing an economic slowdown. With that being said, the international community is trying to figure out how China is going to resolve the existing crisis and how it may affect the entire global economy.
Analysts are skeptical about the Chinese government’s ability to revive the former pace of economic growth. In 2015, China saw its economy boost by 6,9%, which is said to be the weakest annual growth over the last few years. At the same time, some experts believe that the official stats are fake and the actually growth is only half the size. They say that the existing crisis has to do with several factors.
First off, the experts point to China’s inefficient system public companies are based on. For those of you who don’t know, China is still a communist state despite have traits of a market economy. The public sector is huge and represented by all industries, from telecommunication to the energy sector. In September 2015, the Chinese authorities announce their decision to privatize several public companies. Still, they didn’t mention the list of those companies. Some experts believe that these consequences of this process are going to determine the future of the Chinese economy.
On top of that, analysts say that the communist system has another drawback, which is its closedness. International experts say that the biggest threat is not the economic slowdown itself but the government’s unpredictability, which is why foreign investor don’t trust the government and their official figures anymore.
Experts also remind us about the existing crisis in the local construction sector. The crisis emerged as the result of oversaturation in the sector. There are whole residential quarters full of newly-build multi-storey buildings with nobody living in there. Take, the town of Ordos as an example. It was built for 300 000 people but only 28 000 live there. Most of the owners bought those apartments as an investment rather than a place to live in. They say, people just believe that the residential property in China is going to start growing in price at some point in the future. Still, experts say that this is unlikely to happen at all. If the construction sector in China crashes, this is going to have a devastating effect on the entire national economy of China.
Jus a couple of years ago, the Chinese GDP used to be around 10%. Now it is under 7%. This year, the figures are expected to be 6,3% or so. In 2017, it is expected to drop down to 6%. Apparently, such predictions triggered a wave of sellouts in the Chinese stock market ad a huge flight of foreign capital. With that being said, some experts anticipate a further slowdown, which may affect the global economy. Others say that despite the crisis, this is not going to turn into another major crisis like the one we say in 2008.
