China is likely to soon overtake Japan to become the world's second largest economy, a milestone that will only fuel growing fears about the economic might of the world's largest country. China's economy grew by 8.7% in 2009, even in the face of a global economic slowdown. Japan, which will report its full-year numbers on Feb. 14, is expected to slip behind China due to the steep decline in its economy in the first half of last year.
Economists are saying that it is probable that the Chinese economy will eventually overtake the U.S economy in 20 to 30 years. However, in the 1980's, Japan was once thought to be an unstoppable economic force but has suffered and is currently in what is being called the "Lost Decade." Although there are differences between Japan of the 80's and China of today many similarities are seen.
There are signs of a developing asset bubble in China's housing and equity markets. China's banking system has been dogged by questions about its transparency. There is also a dependence on exports that are supported by the government's manipulation of the currency and limits on population growth.
The last year shows one of the problems with a country whose economy is greatly export driven. When the global recession hit, China's exports were not spared, and it took about $586 billion in government spending, to fill the gap.
It seems like one of the morals from the video was that certain markets need finacial regulations. Lots of people seem worried that China may overtake the U.S.A. as the biggest economy. Is that a bad thing? How are we measuring economy? If we are using GPD, which we have seen the problem with, then it makes sense that China would be the biggest because they have such a larger population. Biggest GDP doesn't measure the standard of living, so why worry about a competition over it?
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The term 'asset bubble' also made me think about the video today. I wonder if China is blinded by its success at the moment and isn't taking the time to step back and look at the big picture. Although, I have to say that it seems like it would be hard not to recognize the warning signs, especially since China is surrounded by countries who are experiencing a horrible recession.
ReplyDeleteAfter reading this posting I also instantly think of the video we watched today. I hope that China doesn't posses the same ignorance that we had here in the U.S. during our economic downfall. Furthermore, I hope they are able to recognize any writing on the wall that may lead to an economic crash. A E
ReplyDeleteI agree that this post seems eerily reminicient of the video we watched in class. Hopefully China will look at the US's current financial woes as a warning of what they may be headed towards. A,E
ReplyDeletethis post is interesting for me, is Chinese economy will be able to grow in a long period and never experience the "Lost Decade"? Chinese government should learn from other countries's experiences during this recession. But what I though is: the finacial market definitely have its own regulations or its own balance, no one would be able to keep booming and never face to the decay period. And the thing is China also experience the effects of the global recession.
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