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    Chinese economic development encouraging last year

    January 28th, 2010 Posted by CMC Gao Hua 0 thoughts on “Chinese economic development encouraging last year”

    Due mainly to an impressive spurt in the final quarter of 2009 which increased by over 10 percent compared to a year previous, Chinese financial authorities have said that their economy grew by 8.8 percent, a rate which exceeded the government’s projections.

    It is almost certain that China will now overtake its neighbors Japan as the world’s second largest economy, with the Japanese quarterly GDP figures due in late February. Most analysts believe the Japanese economy is likely to have shrunk by around 7 percent last year, and that sentiment was backed by a report last month by regional investment and trading firm CMC Gao Hua which revealed a Japanese dip.

    “I think the Chinese ministry of finance came up with a very clever policy stimulus,” says Jim O’Neill, head analyst at Goldman Sachs. “In some ways maybe the economic crisis was not such a bad thing for them as they have been forced to add extra layers of protection to the economy. I like the way they were decisive with their actions. It was a very bold and aggressive response.”

    “We can now say that China has become as important as America has become less so. Unlike Japan they are replacing the focus of international trade with domestic demand both with regards to investment and consumption,” he added in a BBC interview.

    He said that overdependence on the U.S. market was part of the reason why the financial collapse had such a far-reaching effect. Countries have now been forced to look towards their own population for growth.

    “The switch to domestic demand is not just important for the people of China but it will have indirect effects on all their trading partners also, including people in the UK,” O’Neill said.

    The communist nation suffered heavily in 2009 with lowered demand from its largest purchasing partners. Many factories closed down and unemployment skyrocketed. After the government brought in a huge stimulus package, the economy quickly recovered but there are indicators now that the manufactured expansion may have been too swift.

    “There are serious concerns over the sustainability of this very fast growth that was stimulated by the policy changes. It really is anyone’s guess what’s going to happen when the support is taken away,” said Peking University professor of finance Michael Pettis.

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