China, India Grapple With Growth Challenges

Discussion in 'China' started by ice berg, Jul 11, 2012.

  1. ice berg

    ice berg Senior Member Senior Member

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    http://online.wsj.com/article/SB10001424052702304058404577496443063859250.html
    China and India are both dealing with economic slowdowns but are on completely different footings to tackle the challenge. Beijing has a range of fiscal and monetary options to revive growth, while New Delhi must make tough political decisions to stem its decline.

    Growth in both countries is essential if the global economy is to expand, given the recession in Europe and the sluggish recovery in the U.S. and Japan.

    But India and China are grappling with different issues. China doesn't want to repeat the mistakes—such as triggering a property bubble—that it made in its all-out response to the global financial crisis of 2009. India, meanwhile, is struggling to carry out structural economic reforms it failed to enact during its recent boom years.

    Related

    China's Consumer Inflation Eases Sharply
    China's gross domestic product has grown at an average annualized rate of 10% since 2000, but government officials know they can't sustain that torrid pace. Growth fell to 8.1% year-over-year in the first quarter, the slowest pace since 2009, and is widely expected to fall to about 7.5% in the second quarter. If the euro-zone crisis persists—or China's stimulus is poorly carried out—China's growth may weaken further.

    But China is better positioned to handle a shock than it was in 2008. It relies less on trade for growth: In 2008, China's net exports amounted to 7.7% of GDP; in 2011 the share had dropped to 2.6%.(and pundits claim that chinese GDP growth are export driven:rolleyes:) Beijing reported on Monday that inflation declined to 2.2% in June, compared with a year ago. With government debt at an estimated 22% of GDP, China has plenty of levers to pull to stimulate its economy in the face of declining demand.


    China and India are both dealing with economic slowdowns but have completely different ways of tackling the challenge. The WSJ's Jake Lee speaks with Hong Kong Bureau Chief Ken Brown.

    China's economy faces "huge downward pressure," Premier Wen Jiabao said over the weekend, and repeated that China was committed to boosting growth.

    "China is in a very comfortable position compared to the rest of the world," said Luis Kuijs, project director at the Fung Global Institute, a Hong Kong think tank. "It's more a matter of choice of what policy measures it will take to stimulate the economy, rather than whether it will be able to."

    A large portion of China's economy is in the hands of its state-owned companies. That means the government can more easily get its economic decisions carried out—though it does present long-term problems for China as it tries to shift to an economy based on more innovation, competition and private enterprise.

    The five largest Chinese banks, all state-owned, account for about 44% of the nation's financial assets and listen closely to the central government's "window guidance"—ignore-at-your-peril advice about lending doled out by bank regulators and the central bank. State-owned firms dominate infrastructure sectors including transportation, energy, electricity, construction and steel.

    The Chinese government recently has stepped in with stimulus measures. To boost demand for commodities and construction among other industries, the government approved two steel plants and several energy projects. On the monetary front, the central bank has cut interest rates twice in the past few weeks—the first such moves since December 2008—and in May reduced the level of reserves banks are required to hold. China has plenty of room for additional monetary moves.

    Indeed, one challenge for China is to make sure it doesn't overdo it. During the financial crisis, the government ordered state-owned enterprises to step up lending considerably. The result was a flood of money into infrastructure and real-estate projects that spurred growth, but produced a spate of bad loans and a property bubble—which the government has spent two years trying to deflate.

    India faces an economic challenge similar to China's, but has fewer potential solutions. New Delhi is trying to rebound from 5.3% economic growth in the March 31 quarter, the slowest pace in nine years. Its budget deficit of 5.8% of GDP in the recent fiscal year, which overshot a target of 4.6%, leaves little room for fiscal stimulus. Government debt is estimated at 67.6% of GDP.

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    Bloomberg News (India), Reuters
    "India's hands are tied, and because of that it's much more exposed to the global slowdown," said Frederic Neumann, co-head of Asian economic research for HSBC. "It has no fiscal ammo left to pump-prime the economy, so it has to endure a slowdown and take it on the chin."

    India's main challenge is to stimulate business investment, which is drying up amid wariness among both domestic and foreign companies about shifting tax policies and regulations. The country's currency, the rupee, has tumbled against the dollar in the past year, partly due to growing investor concerns about India's high current-account deficit, which is roughly 4% of GDP. The rupee's fall has driven up real import costs for Indian companies and made foreign-currency loans more expensive to service.

    The Reserve Bank of India in April cut interest rates for the first time in three years to fuel business lending. But when industry was looking for more last month, the central bank said it couldn't cut rates further with inflation uncomfortably high at 7.6%.

    "The sad thing is that it makes sense in China for it to be slowing down, because it's maturing from a low-income to a middle-income economy," said Rob Subbaraman, Asia economist at Nomura Securities. "In India, growth should be picking up and not slowing down.":p

    Last month, China and India made sizable funding commitments to the International Monetary Fund to help counter the euro-zone debt crisis. China pledged $43 billion while India said it would provide about $10 billion. But the Asian giants could provide a much bigger lift to the global economy by getting their own houses in order.
     
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  3. trackwhack

    trackwhack Tihar Jail Banned

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    Wait a second. Exports are 2.6% of China's economy? Should I even bother to continue reading this peice of shit article?

    1) Assuming China is a 6 trillion dollar economy, 2.6% translates to 160 billion. So China exported only 160 billion worth of goods in 2011? Dont make me laugh. What kind of trash journalism is this?

    2) China's government debt as per even the CCP is 55% of GDP, As per KPMG estimates it is 125% of GDP. Where the hell did WSJ get the 22% of GDP number from? What readership are they feeding these bullshit numbers to?



    Finally to close the argument, India growth offset is almost on the dot equal to the rupee depreciation seen in the last 12 months. We lost 3-4 percentage points due to that and add that to the 6% growth and you see that fundamentally nothing has changed. What has changed is foreign investor sentiment. They have pulled out money, well good for them. They can re-enter the market at higher rates 12 months down the line.
     
  4. agentperry

    agentperry Senior Member Senior Member

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    one is struggling and hopes to perform other just succumbed to policy paralyses
     
  5. ice berg

    ice berg Senior Member Senior Member

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    Or wait for rupee to depreciate further.
     
  6. addiction

    addiction Regular Member

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    We don’t artificially control our currency and population...that is the work of dictator and communist regimes..man, u r talking-writing in a free world that does not mean u belong to a nation that has freedom for its citizens....u r not used to it....so, go slow when you talk!
     
  7. ice berg

    ice berg Senior Member Senior Member

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    LOL, you need to take a crash course in basic economics. Aside from a few countries(like EU countries), most nations manipulate their currencies. The difference lies in the tools.

    P.S I love the part about dictator and communist regimes and free world and what not. Feels like we are back on fairytale land again. hahahaha.Some people just couldnt handle the real world, but need to invent villains and saints.
     
    Last edited: Jul 11, 2012
  8. trackwhack

    trackwhack Tihar Jail Banned

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    Net exports, fair enough. But how does that mean jack in terms of reliance on exports/trade. China exported nearly 2 trillion worth of goods last year. So trying to mask it by showing a fall in net exports is intentional misleading by the idiot who wrote the article.

    Government debt is Government debt. They used the term government debt. As per CCP itself, Government debt is 55%. Which itself is bull.

    Yes, we will wait for the rupee to depreciate further.
     
  9. ice berg

    ice berg Senior Member Senior Member

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    Sigh.... Net export = Export - Import. If China exports 2 trillion worth of goods last year, she also imports shit load of goods.
    According to the author net export contributes 2,6 % of GDP.

    I highlighted it because it is a common mistake here that ppl believe China is export driven. In reality it is investment based.
     
  10. trackwhack

    trackwhack Tihar Jail Banned

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    Chief, the differential is not even an indicator. Exports are what keeps your people employed. The absolute value for exports is what is the key indicator. The differential is of no use. A simple commodity run on prices will skew the differential as trade surplus will fall.

    Net exports being zero can be driven by zero exports and zero imports too. Thats a scenario where Peking is burning and Lhasa is free.
     
  11. ice berg

    ice berg Senior Member Senior Member

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    Dreams are free. :wave:
     
  12. addiction

    addiction Regular Member

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    ànd u just said it again....unfortunatelly, what is forced on u is dictator and communist regimes and u dont have voice to talk about your choice...so feel free and vent your frustation in Indian Defence Forum since, guess what? if you guess, 4 cents from me tonight....jingo...:)
     
  13. s002wjh

    s002wjh Senior Member Senior Member

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    anyone naive to think a fail chinese economy doesn't affect europe/america/their home country need to take some economy class. china is the largest exporter, but also one of the largest importer. GM/Ford sell more cars in china than US, same with many other product. if chinese economy slowdown so does the export from other countries. when a countries economy become world #2, it will affect the world economy. its globalism and its tie to the world.
     
  14. trackwhack

    trackwhack Tihar Jail Banned

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    hmm, I notice that recently many chinese have dropped their - 'we are untouchable', cocky attitude

    now its more like , if we go down , so do you.
     
  15. s002wjh

    s002wjh Senior Member Senior Member

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    you do know i'm american. and i do shop at wallyworld sometime, and don't want to see my ipad raise price by 600%
     
  16. J20!

    J20! Senior Member Senior Member

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    Some where in Li Na's imagination
    Maybe you'll also notice that your economy is in worse shape when compared to China's.

    Actually now its more like YOU'LL GO DOWN BEFORE WE DO..
     
  17. no smoking

    no smoking Senior Member Senior Member

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    What is this related to the economic growth struggling?
    Why everytime our indian friends always turn to these political nonesense if they have nothing else to contribute?
    Is that a dictator symdrome?
     
  18. trackwhack

    trackwhack Tihar Jail Banned

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    we will have to see
     
    J20! likes this.

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