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China faced with slowdown of economic growth

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Chinese authorities are struggling between supporting economic activity and targeting economic policy measures, weakening many companies and affecting the balance growth by rising wages. According to the latest Coface Country Risk Assessment Review, China continues to struggle with the 2008 economic stimulus measures that benefit some sectors but are having negative effects on others. The report revealed China suffered a decline in retail sales, a drop in industrial production to its lowest level in 35 months and an 11 percent decline in exports to Europe. Although the stimulus plan intended to support the economy, the cause of imbalances between investment and consumption have proven costly in the private sector. The share of consumption declined in 2009 by 34 percent, down from 46 percent in 2000. The report disclosed 82 percent of companies survey declared they were affected by the increase in cost of labour and 45 percent said they were affected by a lack of access to finances. The 16 percent wage hike by Chinese authorities to balance the consumption growth could impact companies in 2012 and further on into the medium term. The wage rise is expected to intensify with an aging population as the number of elderly grows more rapidly than the active population. The report enclosed that the active population is expected to diminish by 2015 which means the workforces will be scarcer and more expensive and could lead to company bankruptcies. According to Coface, the Chinese authorities could retain both objectives through more moderate support for growth than in 2008 and 2009 and continue to increase wages encourage household consumption.

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