Date: 2024-05-14 Page is: DBtxt003.php txt00003101
Country ... China
Is China’s $6 trillion economy on a bubble?
AJStream in November 2011 ... The world’s second-largest economy could be slowing after decades of record growth.
COMMENTARY
Peter Burgess
Is China’s $6 trillion economy on a bubble? The world’s second-largest economy could be slowing after decades of record growth.
The world's second-largest economy could be slowing after decades of record growth. The Stream talks to Dean Baker, co-director of the Center for Economic and Policy Research, and political economist Victor Shih about the potential for a Chinese bubble burst.
Economists hope China’s continued growth (which contributed to nearly a quarter of all global economic growth in 2011) will help pull struggling EU countries out of the current economic crisis and save the U.S. from a potential double-dip recession.
But behind the decades-long boom in China, there are signs of fundamental market weakness that suggest a downturn could be just around the corner. Much like the U.S. in 2008, many Chinese banks are overleveraged and their debts are obscured by elaborately repackaged securities and other questionable financial products.
China’s unemployment is on the rise, especially among the middle class, and many local and municipal governments appear to be slipping into greater debt.
Many are comparing China’s real estate market to pre-recession conditions in the U.S. Easy credit has fuelled demand for commercial and residential housing and allowed new construction projects to crop up across the country, even in cases where demand for such development is scarce.
Chinese authorities have built entire “ghost towns” on speculation alone. While the empty cities feature finished apartment buildings and homes, paved roads and finished sidewalks, government office buildings, museums, and even theatres, they remain almost mostly uninhabited.
Combine these rapid-growth factors with cheap labour and land, and the result is a rate of inflation the government has been trying to cool. But economists fear the government’s efforts to slow growth could result in a too-rapid deflation of the real estate market. The results could be catastrophic, not only for the Chinese economy but for global markets as well.
China has been investing in Africa, including infrastructure development, land purchase and lease, and aid-for-resources projects. If China’s economy slumps, countries including Angola, Zambia, and Democratic Republic of Congo could suffer.
Dean Baker, co-director of the Center for Economic and Policy Research, joins the show to discuss China’s economy. Political economist Victor Shih also joins the discussion via Skype.
The following images were shown in the AJStream programme
China's GDP was growing at a high rate, but has taken a recent dip.
From November to September of this year, Shanghai's stock has dropped significantly.
One result of China's economic decline is the advent of ghost cities, where China's increased rate of property building, but low demand for housing has left millions of units built in the past several years vacant. These 2010 Google satellite images illustrate the low population density of the ghost cities.
Chenggong is in the southern Yunnan province of China.
Jiangsu is located in eastern China, approximately 190 miles away from Shanghai.
The city of Erenhot is in the middle of a desert on the border of Mongolia.
This picture shows a closer look at Erenhot, half of which was still under construction.
64 million homes are lying vacant in China.
In just the past several years, China's economy has surpassed France, UK, Germany and Japan, making it second only to the U.S.
Cartoons like these demonstrate U.S. concerns that China's suddenly increasing growth has surpassed the U.S.
In this time of growth, China has substantially increased its oil and mineral investments in Africa.
China's huge stake in Africa has generated cartoons which perhaps express some Africans' anxiety of China's high stake in the continent.
