Why China Won’t Have a Similar Financial Crisis
Kate Zhao is studying business journalism at the Graduate School of Journalism at the City University of New York. She writes in the New America Media:
As the financial crisis in the United States spreads around the world, investors are scrambling for a safe place to dock their money. They can at least find one – China, where a similar financial crisis is highly unlikely for several reasons.
First, slumps in real estate values, which directly triggered the current credit crisis in the United States, aren’t likely to occur in China.
Unlike most countries in the world, in China, the government owns the land. That means Chinese homeowners spend the majority of their income paying for a house on land they don’t actually own. A homeowner simply buys the right to use the land for a certain period of time – 70 years in the case of residential properties.
POSTED COMMENTS: 4 Responses
China potentially has their own “crisis” coming as their economy slows as a result of what is going on in the rest of the world. Less exports will yield higher unemployment and could stoke major unrest………
That what you in the west have been dreaming all this times But alas nothing happened Instead Chinese economy goes from strength to strength. China has large domestic market and only at the beginning of urbanization . Export to US and Europe only account for 30% of All Chinese export. The other Pillar of Chinese economy namely Infrastructure are still hummings And unlike US China and Chinese live within their mean and the treasurer is bulging with surpluses
“what you in the west have been dreaming all this times”
This rather xenophobic phrasing assumes a certain level of malice that I really don’t see anywhere in Phil’s short post. Of course it also assumes that he is in “the West” which you have no way of knowing.
The dialouge on this site should not follow the old “ahh, everyone is out to get me” meme which is ridiculous in concept.
Also ridiculous is the idea that the Chinese economy won’t be slowed by a sharp drop in exports due to worldwide financial panic. I think this article is correct to say that it won’t be a “crisis” in China, but obviously it isn’t a great time for business either.
China’s trade surplus widened to a record in September as exports withstood the global economic slowdown and falling commodity prices reduced the import bill.
Exports rose 21.5 percent from a year earlier to $136.4 billion after gaining 21.1 percent in August, the customs bureau said on its Web site. The trade surplus climbed to $29.3 billion, a figure derived by deducting the value of imports from the number for exports.
China has stimulated the world’s fourth-biggest economy by cutting interest rates twice in a month to counter the financial crisis. The surplus swelled a record $1.8 trillion of foreign- currency reserves that may help the nation to maintain growth of more than 9 percent as a global recession looms.
“It’s not a bad thing to have a relatively large trade surplus when there’s a global financial crisis,” said Wang Qian, an economist at J.P. Morgan in Hong Kong. “China’s foreign- currency holdings will help the country to survive the crisis.”