China’s declining GDP has sent shockwaves through the financial sector as analysts begin to question China’s long-term economic strategy. As Minxin Pei points out, “zombie firms,” or companies primarily supported through bank loans and government subsidies, are complicating China’s sustained growth. By eliminating these firms and instituting reforms, China can bolster innovation and ensure the opening of its economic markets.
Although China’s slowing growth has caused a stir amongst analysts; He Weiwen explains China’s growth rate is not of concern.
Thanks to the central government’s stabilization policies, Chinese enterprises have accelerated production to make up the inventory rather than slowing down production to digest the inventory. The macroeconomic operation will continue the rising trend and China’s GDP growth in 2013 may be faster than 2012.
While avoiding the label of “currency manipulator,” China’s currency, the renminbi, continues to face criticism by the US Treasury Department for being “significantly undervalued.” Now, an analysis of global trade data seeks to end the correlation between trade surplus and currency exchange rates.
It’s time the US reexamine the concept of strategic ambiguity in dealing with China. It simply has not worked. Both the US and China can better deploy their energy on other issues rather than managing the ups and downs of the bilateral relationship.
Recently, there has been an increasing call from the global sphere for the Chinese government to faster globalization of the RMB, since stronger economic growth in China can also help pull the rest of the world out of its current financial slump. The next question comes to whether China is ready for the challenge in next five to ten years.
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