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March 7, 2008

Chinese economic miracle set to continue

by Richard Kilner

Story link: Chinese economic miracle set to continue

According to Justin Lin Yifu, the World Bank’s chief economist, China is set for between one and three decades of rapid economic growth.

The reasoning behind the longterm prediction is the country’s enormous domestic market, and the overseas investment which is flooding into the economic juggernaut.

Lin has also stated that he believes China’s industrial status still has room to be upgraded significantly.

Foreign investors are utilising the country’s low costs as a base for manufacturing exports, and/or to tap into the ever growing domestic market.

Decades ago China was an economic basket case, until it fell under the leadership of Deng Xiaoping, 30 years ago.

Under his leadership the Communist Party retained the one-party political state, but began to drive through capitalist reforms.

Unlike in the Soviet Union, where political and economic reform went hand in hand to create a handful of oligarchs, the Chinese approach has led to millions seeing their quality of life improved, albeit under a one party state.

China’s inflation is, however, extremely high at 11%, and this year will be the fifth in a row where growth has been in double figures.

One of the few downsides to a swiftly growing economy is the potential for social instability, which has led to the government’s policy of trying to slow down the rampant growth, through multiple interest rate rises and increasing substantially the capital banks must retain in reserve.

 

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