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China must direct its economic growth
If statistical jugglery is anything to go by, then China, growing at an extraordinary rate of 11.9%, is poised to overtake Germany this year as the world’s third largest economy. But the key concern is whether the growth is sustainable. Rhetoric in Beijing goes on to suggest it is, and that the government is taking steps to change the patterns of economic growth & deepen reforms; yet 1.3 billion people still have a long way to go before their living standards compare to counterparts in developed economies.
The growth in top three matured economies of the US, Japan & Germany, which have occupied the top three slots for the last three decades, has slowed down; and as a result of foreign investments & trade, economic growth of China has been accelerating. Some analysts are of the view that these statistics signal overheating, which would prompt the government towards top-down measures. OECD feels that the Chinese government has been ineffective n countering negative impacts of its rapid economic development.
Inflation is yet another concern; the CPI has jumped to 4.4%, a 33-month high; which is bound to influence low-income earners. Aveek Barua, Chief Economist, HDFC Bank, commented to 4Ps B&M, “The Chinese economy is definitely not cooling, though there have been signs of interest rate hike...” The economic growth is being fuelled by government-led investments rather than spontaneous improvements in the demand and supply relationship. Economists caution against being too optimistic and argue that more attention should be paid to economic structure rather than growth rate.
Edit bureau: Gyanendra Kashyap
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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