China to deal with 5 risks to prevent economic crisis in 2017
The recent booming of CNY trade volume on localbitcoins is hailed by many as the doomsday of centralized exchanges. However, it’s more of a reflection of “asset shortage” in China. Many people find it hard to locate assets that could outrun KPI or inflation. Some analyst even announces that the whole economy in China is a ponzi scheme as a whole. As per Ma Guangyuan, an independent economist and senior lawyer, there are five major risks that China has to deal with in 2017.
The analysis was a response to the 45 billion government spending on infrastructure.
1. Addiction to economic stimulus policy
Addiction to economic stimulus policy is similar to that of drugs.
The government seems unable to accept the natural adjustment of economy and shows “zero tolerance” to the decline of growth rate. Although the authority is fully aware that the stimulus-based growth is not self-sustainable, they have not found any other effective options to stabilize the economy.
2. Risk of non-reform or chaotic reform.
Reform is the greatest expectation of the people and the key to confidence of stability. There have been lots of commemorative events on 19th Feb 2017, the 20th anniversary of Deng Xiaoping’s passing away. The real motives behind these voluntary commemorations are the public’s expectations for reform. At present, private investment is not weak and entrepreneurs lacks confidence in the Chinese economy. They don’t spot any signs of pushing reform forward, which is the main reason for the economic downturn.
3. The excessive production capacity and corporate debt
During the 2008 financial meltdown, Chinese government launched a so-called “4 trillion” stimulus plan, which has evolved into many folds of debt since then. The excessive production capacity and corporate debt resulting from the stimulus policy in the past.Ma predicts that it’s very likely that in this year the capital chain link of enterprises in the excessive sectors might break. Precautionary measures must be taken.
4. The risk of real estate market crash
Ma believes that the real estate price adjustment is a high probability event. If the real estate market decline, the government will resort to old-fashioned investment stimulus.
5. Lack of strategic move under the complicated international environment.
Chinese government always fails to make forward-looking move to issues happening outside China, like Trump’s presidency, international trade protectionism and other geopolitical issues.
At the end of the article, Ma expresses his concern that each time when economy takes a downturn, it would be a test of determination of the authority to push the reform forward. Many private entrepreneurs lost their faith because the shifting policy. The “stimulus boom” is an easy but self-deceiving resort.