If Chinese sources are to be believed, there is absolutely nothing wrong with the economy. In fact, steady growth will be maintained, according to Premier Li Keqiang. Given the recent Yuan devaluation, that is a rather strange statement. Moreover, there is a plan on the table to increase economic transformation, allowing the country to overcome any and all challenges along the way.
Any news coming from China is always subject to a fair amount of scrutiny and mistrust. Since the government is not shy of censoring information or spinning information in a particular direction, one never knows what to expect. Stating how the country will be able to maintain steady growth for the foreseeable future seems a bit odd at this time.
It is true that China has been working hard on an economic solution. The Yuan is losing value on purpose, although these efforts seem far too insufficient to achieve the required goals. Adapting to slower growth rates is a big change for everyone in the country, and policymakers are still not sure how they can contain the domestic issues.
Right now the plan is to ensure a structural economic reform in the country. At the same time, policymakers have to come up with a way to keep house prices down, decrease debt levels, and expand aggregate demand. It is a tough balancing act, to say the least, but president Li feels confident that China can sustain its growth during the coming months.
According to recent data, China has seen an economic growth of 6.7%. That is quite a surprising number, although one has to keep in mind that the information is published by the Chinese government, and not an independent source. With government spending on the rise and a sudden increase in domestic property, weak exports are less of a significant issue for the time being.
Premier Li also mentioned how China has been adopting “new ways of macroeconomic regulation,” although he did not go into details. With a prudent monetary policy, things are indeed evolving in the right direction. The project growth numbers, however, remain laughable at best, and common sense tells us that they are impossible to achieve.
That being said, Western investors are keeping a close eye on the Chinese market. Venturing into this business is virtually impossible, due to existing trade restrictions. Whether or not that situation will change remains anybody’s guess right now. One thing’s for sure, though, and this is that Russia and China are working on financial solutions that will either benefit their economies or alienate them from the rest of the world.
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