- Posted July 10, 2012 by
This iReport is part of an assignment:
Economy: Are you better off?
The Future of China
The view in most of the world is that China is indestructible. Shrugging off the crises multiplying elsewhere, China seems to surge from strength to strength, its spectacular growth marching on no matter what headwinds may come. It appears inevitable that China will overtake a U.S. mired in debt and division to become the world’s indispensable economy. Those businessmen and policymakers looking to the future believe China’s “state capitalism” may be a superior form of economic organization in dealing with the challenges of the modern global economy. But talk about capitalism in China isn't fully understanding according from many reasons which are faced in front of us.
My answer to all of this is: think again.
I don’t doubt for a second that China will be a major economic superpower with an increasingly influential role in the global economy. In many respects, it already is a superpower. But that doesn’t mean the economy is free from problems, a good number of them created by the very statist system lauded by pundits in the U.S. and Europe. And in my opinion, if China doesn’t change course, and in a big way, the country will experience an economic cris is. They spending much, investing in everywhere but not thinking about results and returns from investment. China invested in EU over 2.2 Trillion USD and half in USA. They trying to buy everywhere all opportunities what they see, but here isn't important what to buy, here is important what will be after it? Today EU is in crises and cost of living decreasing in day to day.
According from this all i can say that Economy of China is unstable and it's likes as good economic propaganda with economic opportunities which we see and remembering it in everyday from different magazines and TV.
A big part of the bad math is created by China’s state capitalism. China has adopted a form of the Asian development model, invented by Japan and followed, to varying degrees, by many rapid-growth countries around East Asia. The model, very generally speaking, functions like this: 1) capitalize on low wages to spark growth through exports and industrialize quickly with hefty amounts of investment, 2) guide the whole process with the hand of the state, 3) employ industrial policies and state-directed finance to progress into more and more advanced sectors. This system generates fantastic levels of economic growth for a while, but then eventually, it crashes.
Cheap credit is made available for industry, or the state outright orders money to be invested in certain preferred projects. The exchange rate is controlled to encourage exporters. All sorts of subsidies, for energy, exports and so on, are dished out. Banks are not commercially oriented but act to a great degree as tools of government-development policy. All of these methods funnel money, private and public, into industrialization, creating the astronomical growth rates we see again and again in Asia.
The problem here is that prices can’t stay wrong indefinitely. There is a good reason why classical economists are always so focused on allowing markets to find the correct price level. In that way, markets send the proper signals to potential investors on where money should or should not go.
And what will be the future of China?
By Personal Financial and Investment Consultant Irakli Berdzenadze