The Chinese Bubble: The Fastest Growing Economy

Best Growth Stock – China’s relentless economic growth at this present day has caught everyone’s eye around the globe. A quarterly poll conducted by Bloomberg of 1,000 Bloomberg customers who are analysts, investors or traders was concluded on a note that 45% predicted that a financial crisis might take place within five years in China whereas other 40% are expecting the crisis to take place after 2016. Whereas only 7% opined that China has a good chances to escape the turmoil. The majority polling for the negative prediction could be derived from the current credit-driven bubble which has emerged in China and could be destructive in future.

As reported by China’s National Bureau of Statistics on 20th January, China’s economy grew at the fastest speed in last 3 years i.e. at 10.3% in 2010 whereas the GDP of the country turned out to be 39.8 trillion Yuan ($6 trillion).

China and U.S. trades have recently been very dynamic with 13% of China’s export taking place only between these two nations. The sum value of all the exports and imports of China last year was $3trillion. China has a phenomenon share of $896billion in US treasuries. The trade relations between these two countries were strengthened and visible to the entire world after Chinese President Hu Jintao paid his visit to the White House for having some meets with US President Barack Obama. Read more about President Hu US visit.

A chief investment officer from San Francisco showed an exceptional worry that the 2nd largest economy of the world soon will have to face major disorder within their banking system. China, in order to curb inflation has already raised the interest rates two times.

China is spreading two major concerns around the financial market, first being the ‘rapid wage inflation’ and the second being ‘rising prices of property.’ Some investors claimed that China could keep this stable stage of growth for next few years. The credit for the mounting number of investors in China could be given to the 3 decade market innovations which have taken place in the country helping to wipe out the Maoist impoverishment.

The brilliance of the Chinese government can be seen from the way they have managed the entire economy in the last decades but the real challenge comes when the economy grows and becomes complex. China is majorly depended on its exports but the mounting tensions between China and US endangers the economy in future. Chinese officials plan to wean the country from its dependence on the exports. But again a question arises that irrespective of the huge population of 1.3billion, are they rich enough to become the consumers.

The global economy shall feel the effect, if the Chinese economy trembles some day.

Chinese government’s ability to ward of the demands for a better political liberalization shall let the government remain stable. But other very small number felt that there are certain chances of political turmoil in another year whereas comparatively larger number felt that the possibility of a political crisis could be within next 2-5 years.