Chinese Economy 2008  

 

The growth of the Chinese economy has been one of the most significant development for the global economy. The implications of Chinese growth, combined with a population of 1.4billion, have far reaching implications.

Firstly, the Chinese economy has a growing an insatiable appetite for imported raw materials. China is taking up to 33% of the increase in demand for oil. CHinese manufacturing industries are increasing demand for raw materials causing rising prices and potential cost push inflation, if the growth rate increases.

The Chinese current account surplus remains stubbornly high, despite recent devaluations of the dollar, the Chinese current account deficit is over 10% of GDP or $250bn. With all the foreign currency the Chinese are wielding increasing economic and political influence. For example, recent comments by low ranking Chinese officials about the need to 'diversify from weak currency's ' led to further falls for the US dollar.

If the Chinese were to sell their dollar assets it would cause serious economic problems for the US economy, (to say the least)

Despite the continued double digit growth of the Chinese economy there remain many potentials problems for 2008 and beyond

  1. Inflationary pressures. Inflation is rising close to 5%, this could potentially lead to a boom and bust economic cycle.
  2. Growing inequality between north and south
  3. Shortage of raw materials could push up prices and costs
  4. Slowdown in US economy - the main trading partner.
  5. Continued unemployment due to privatisation of inefficient state owned industries.
  6. Disguised unemployment amongst the poor farmers, especially in the north
   
Currency Yuan
Population 1.313 million
Human Development Index 75.5%
Adult Literacy 90.9%
Capital Beijing (Peking)
Main Trading Partners United States 21%, Hong Kong 17%, Japan 12% South Korea and Germany
Education Spending as % of GDP u/a

Economic Statistics China

  2007 2008
GDP 2007 11.5% 10.0%
Average Growth 1994-2007 9.1%  
GDP per head $1,470  
Inflation 4.5%  
Exchange Rate 7.87  
Current Account Deficit +10.9%  

 

 

 

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