China's economy: What are the challenges and opportunities?

By alanlambert

For the past twenty years, the economic growth that no other country can achieve has turned the Chinese economy from a pool of stagnant water into economic power stations, and at an alarming rate, the country has absorbed goods and capital from the rest of the world. Countries such as Canada, Australia and other major resource-producing countries take this express train to achieve their own great prosperity. Today, this huge red machine is at an important turning point. One critic has ever questioned whether China has become the world's largest bubble economy, a huge fraud which is about to be exposed? Or is it really a waking and would-be dominator of the world.

The practice of China's massive injection of capitals has produced results. Critical infrastructure and social housing projects have been put into practice rapidly. Large government subsidies have helped so many factories to maintain. However, low-cost credit and the influx of investment funds have also caused dangerous bubbles in real estate sector as well as other assets.

Nowadays, the Beijing government is taking more stringent measure, that is, to slow economic train speed to curb rising inflation, and not to derail this train. The new "second five" lists a clear agenda, intending to shift the increasing focus to promoting domestic consumption, and thus to reduce the dependence on low-cost manufacturing industries. At the same time, the country will encourage the development of the service industries and the investment in the biotechnology and other "emerging strategic industries". The policies it has adopted to squeeze the buddle out of the present economic system shows its determination in shifting the model of the economic model. More measures will be taken to encourage domestic consumption to foster the economic development.

According to the estimation of some economists', if this economic transformation achieves success, with the growth in wages and narrowing of income gap, China will be able to adapt to a lower annual growing rate. China's supporters believe that a pragmatic and flexible leadership can take control of this very important and difficult balancing act again. They believe that this country is still on the road to taking place of the U.S. and Europe which are challenged in the finance and are suffering the political paralysis and it will be the next superpower, one which will far surpass its rivals within the country, just as Britain dominated the 19th century and the United States dominated the 20th century.