Devaluation to give China a global edge: China had been averaging an annual growth rate of more than 10 per cent since 1980.

Abstract

China had been averaging an annual growth rate of more than 10 per cent since 1980. In recent years, the growth rate declined significantly to around 7 per cent. In 2015, it is projected to decline further to 6.8 per cent. China’s economy is vulnerable to many factors as augmented fiscal deficit is high at 10 per cent of the GDP and debt to GDP ratio has increased to nearly 60 per cent.

The credit to GDP ratio has also increased, especially in sectors involving social financing. The steep rise in corporate investment during the last few years is mainly due to credit. Efficiency of investment has been declining along with corporate sector profitability. The housing sector, an important source of growth and employment, is suffering from considerable over-supply of nearly three years,especially in smaller cities.

The equity market in China has been a major concern. The rapid rise of the market by nearly 150 per cent since mid-2014 raised concerns about price volatility and possible implications for broader financial stability. The rise was worrisome because of a dismal global market trend and the slowdown of the Chinese economy itself. Markets dropped by 30 per cent in less than three weeks in July, 2015. The authorities restored orderly conditions by providing liquidity; reducing selling pressure by a six-month ban on sales by large shareholders; and suspending new initial public offerings. Read more at: https://www.tribuneindia.com/news/archive/comment/devaluation-to-give-china-a-global-edge-121312