China and The Economic Crisis

6 Mar

For many years Chinas economic growth has been growing at what some may call an unsustainable rate, however in recent news Premier Li Keqiang has vowed to concentrate more on other areas of the economy and wage a war on pollution and reduce the pace of investment to a decade-low as it pursues more sustainable expansion(Reuters, 2014). He still refuses however to try and stem the growth of the country as he aims to achieve growth around the 7.5% mark.

Growth in Chinas main provinces are as high as some major countries around the world if the growth target is met it would be the highest among the world’s major powers. This continuous growth has lead to greater inequality in China and is often one of the major talking points when trying to solve some of Chinas problems. After the Economic crisis in 2008, many countries like the US took a more refrained approach to climbing out of the financial burden that was put on many countries and tightened their pockets. China however, took a remarkably different approach and tackled the problem head on by adopting an expansionary fiscal policy. The government introduced a 4 trillion yuan stimulus package for 2009 and 2010. The package amounted to 14 percent of GDP(Yongding, Y.2010).  Alongside this they also considered tax reductions. This was all in the attempt to induce greater spending therefore allowing investment to continue to take place attempting to stay out of the global downturn. Many countries may have struggled to adopt such a strategy as China has a strong fiscal position, a vast domestic market and a strong external position.

After having experienced such fantastic growth over a time where many countries were struggling speaks volumes for China proving that they are a pivotal part in the world economy. However, the more they continue to act in this manner, with very lenient lending strategies, it could see China start to see turmoil therefore it is important that they restore balance ensuring growth is sustainable.

China maintains 7.5% growth target but promises change. Available: http://www.theguardian.com/world/2014/mar/05/china-growth-target-reforms. Last accessed 5th March 2014.

Yongding, Y. (2010). The Impact of the Global Financial Crisis on the Chinese Economy and China’s Policy Responses. Global Economy Series. 25 (1), p19.

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