Comments on: China’s economy: now the bad news http://www.eastasiaforum.org/2009/04/23/chinas-economy-now-the-bad-news/ Economics, Politics and Public Policy in East Asia and the Pacific Sun, 12 Feb 2012 22:50:38 +0000 hourly 1 http://wordpress.org/?v=3.2 By: Pofessor Raemshwar Tandonhttp://www.eastasiaforum.org/2009/04/23/chinas-economy-now-the-bad-news/comment-page-1/#comment-35398 Pofessor Raemshwar Tandon Wed, 17 Jun 2009 07:06:17 +0000 http://www.eastasiaforum.org/?p=3876#comment-35398 In my judgment, China will be able to achieve just 6 per cent growth by the end of 09 due to various factors - and even this growth will not be stable as such due to factors like rising social unrest, unemployment, and also rising income inequalities in different segments of the economy. Due to melting of Himalian glaciers, water in the yellow river is just 10 per cent compared to 30 years back; food crisis also looming on the horizon due to reduced irrigation due to rising industrial pollution in the economy, 40 per cent of ground-water is not suitable for humans nor for fish. Recent estimats tell us that about 75 lakh people die due to growing industrial pollution; deaths due to coal mining, newly born babies also getting sick more, and more. In view of the above disturbing factors, growth rae of 9 per cent is not possible indeed In my judgment, China will be able to achieve just 6 per cent growth by the end of 09 due to various factors – and even this growth will not be stable as such due to factors like rising social unrest, unemployment, and also rising income inequalities in different segments of the economy.
Due to melting of Himalian glaciers, water in the yellow river is just 10 per cent compared to 30 years back; food crisis also looming on the horizon due to reduced irrigation due to rising industrial pollution in the economy, 40 per cent of ground-water is not suitable for humans nor for fish.
Recent estimats tell us that about 75 lakh people die due to growing industrial pollution; deaths due to coal mining, newly born babies also getting sick more, and more.
In view of the above disturbing factors, growth rae of 9 per cent is not possible indeed

]]> By: Yiping Huanghttp://www.eastasiaforum.org/2009/04/23/chinas-economy-now-the-bad-news/comment-page-1/#comment-23956 Yiping Huang Sun, 26 Apr 2009 13:07:34 +0000 http://www.eastasiaforum.org/?p=3876#comment-23956 I agree completely that the future monetary policy decisions are likely to be extremely difficult, both for the Fed in the US and the PBOC in China. My main point is that criticising the Fed or PBOC for the very loose monetary conditions in dealing with the crisis/recession risks is misplaced or at least wrong-timed. Their top priority is to end crisis and avoid deeper recession. The central banks will not be doing their jobs if they don't take any actions now simply because there could be future inflation risks. Inflation risks are for tomorrow, while crisis/recession risks are for today. In way, the inflation risks might be a good worry to have, because those risks could only emerge after the crisis/recession risks abate significantly. Even after the crisis risks die down significantly, I am so sure if inflation will be the main challenge the world will face. Central banks often make all sorts of mistakes, but most reputable central banks normally would not repeat their recent mistakes. I believe that the central banks worldwide will also be highly alert about future inflation problems. So once signs of inflation emerge, the key risk might be for the central banks to tighten too quickly and too aggressively in order to avoid high inflation problem. But that could hurt the recovery momentum prematurely. I think this risk is actually higher than the inflation risk. It is always difficult to predict policies and their consequences, let alone during crisis times. So I agree completely that the future path of policy and inflation deserve close monitoring. I agree completely that the future monetary policy decisions are likely to be extremely difficult, both for the Fed in the US and the PBOC in China. My main point is that criticising the Fed or PBOC for the very loose monetary conditions in dealing with the crisis/recession risks is misplaced or at least wrong-timed. Their top priority is to end crisis and avoid deeper recession. The central banks will not be doing their jobs if they don’t take any actions now simply because there could be future inflation risks. Inflation risks are for tomorrow, while crisis/recession risks are for today.

In way, the inflation risks might be a good worry to have, because those risks could only emerge after the crisis/recession risks abate significantly.

Even after the crisis risks die down significantly, I am so sure if inflation will be the main challenge the world will face. Central banks often make all sorts of mistakes, but most reputable central banks normally would not repeat their recent mistakes. I believe that the central banks worldwide will also be highly alert about future inflation problems. So once signs of inflation emerge, the key risk might be for the central banks to tighten too quickly and too aggressively in order to avoid high inflation problem. But that could hurt the recovery momentum prematurely. I think this risk is actually higher than the inflation risk.

It is always difficult to predict policies and their consequences, let alone during crisis times. So I agree completely that the future path of policy and inflation deserve close monitoring.

]]> By: Lincoln Fenghttp://www.eastasiaforum.org/2009/04/23/chinas-economy-now-the-bad-news/comment-page-1/#comment-23469 Lincoln Feng Fri, 24 Apr 2009 00:20:29 +0000 http://www.eastasiaforum.org/?p=3876#comment-23469 Yiping's article attempts to demonstrate that 8% growth of the Chinese economy this year, though seeming a bit on the optimistic side to many, is more likely achievable than not. If it does as hoped, it will be good for the recovery of the global economy in general and a blessing to the Australian economy in particular given China is Australia's top trading partner and has underpinned the mining boom of the more recent years. A point in the article touches the likely trend of price levels. The author argued that the key macroeconomic problem, deflation, is likely to exacerbate, contrary to many economists concerns about a potential inflation problem as a result of recent dramatic expansion of monetary base. It argues that the pessimistic view of the inflation issue would be right if the normal money supply mechanism works as usual, but it isn’t at the moment – though the quantity of money base increased, the speed of its circulation declined. So a different equation is at work now. He also argues that the rising output gap will have a downward pressure on price. This, however, raises an important issue in managing the price level in the coming months and perhaps a couple of years. While the slowing in the speed of money circulation now may work may relieve the authority from worrying about inflation for now, the pressure is likely to be greater if and when the speed of circulation picks up and returns to its normal course sometime in the future. The difficult to predict the precise timing and its exact course will increase the pressure for the authority to do a finer job in fine-tuning monetary policy, especially given the unprecedented nature of the scale of global including China’s monetary expansion. A truly difficult and real test, but perhaps not necessarily impossible to overcome. Let’s hope so. Yiping’s article attempts to demonstrate that 8% growth of the Chinese economy this year, though seeming a bit on the optimistic side to many, is more likely achievable than not. If it does as hoped, it will be good for the recovery of the global economy in general and a blessing to the Australian economy in particular given China is Australia’s top trading partner and has underpinned the mining boom of the more recent years.
A point in the article touches the likely trend of price levels. The author argued that the key macroeconomic problem, deflation, is likely to exacerbate, contrary to many economists concerns about a potential inflation problem as a result of recent dramatic expansion of monetary base. It argues that the pessimistic view of the inflation issue would be right if the normal money supply mechanism works as usual, but it isn’t at the moment – though the quantity of money base increased, the speed of its circulation declined. So a different equation is at work now. He also argues that the rising output gap will have a downward pressure on price.
This, however, raises an important issue in managing the price level in the coming months and perhaps a couple of years. While the slowing in the speed of money circulation now may work may relieve the authority from worrying about inflation for now, the pressure is likely to be greater if and when the speed of circulation picks up and returns to its normal course sometime in the future. The difficult to predict the precise timing and its exact course will increase the pressure for the authority to do a finer job in fine-tuning monetary policy, especially given the unprecedented nature of the scale of global including China’s monetary expansion. A truly difficult and real test, but perhaps not necessarily impossible to overcome. Let’s hope so.

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