Chinese economy in the thick of recession but government stays unmoved – Part 2

One factor behind ignorance is the multi-year transition of Chinese leadership that happens once in a decade. The Communist Party is on the verge of transferring the responsibilities to their successors and their plan is to do nothing until the next generation
makes it to the helm.

However, there are some things that the corporate sector and economists can do to increase the domestic utilization. They labour laws a poorly observed in China and majority of the population is under the poverty line although they belong to the working
class.

The only way to increase the domestic consumption is to levitate the living standards of the masses so spur the domestic need for goods that are produces locally. Already the Chinese products are quite cheap and exempting several taxes that are slapped on
products before they reach the shelves is going to make them even cheaper.

Justin Lin stated the  examples of Japan South Korea and Taiwan, the countries that made huge economic progress in 1970s and 80s. That might be true to some extend but Mr. Lin avoided the fact that international market was favourable at the time and global
consumption was on its peak.

On the contrary, the current international market is standing on Achilles’ heel. The European imports have decreased exponentially and the US market’s mercurial nature does not promise a stable demand. Moreover, the US economists are not in favour of Chinese
imports anymore.

The word on the street is that they US leadership wants to encourage their own locally produced products and China might see downfall in the coming days.

China survived the 2008 economic catastrophe with the government aides in the form of quantitative easing but this time around, the federal government does not sport such surplus to aide the corporate from coming out of the recession and nature of the problem
is different altogether.

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Posted by Usman Khalid on Dec 26 2011. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry