The Danger To China’s Economy

On the surface it might appear that China is faring these turbulent economic times well.  But buried beneath empty high-rise apartment buildings the shrinking middle-class cannot afford is an unstable economic foundation.  The Diplomat reports:

While the United States, Europe and Japan remain mired in sluggish recovery, China’s economy has continued to boom. But serious questions are now surfacing about China’s own state-led economic management. Massive overcapacity in infrastructure, stubbornly high inflation and a pile of potentially bad bank loans are undermining historic economic reforms only half completed.

Chinese planners face a serious dilemma – should they continue with investment-led growth, or finally focus on building a robust middle class, a policy nearly a decade overdue. Either choice will have global implications.

Staying the course with investment focusing heavily on construction has starved other parts of the economy, costing the average Chinese citizen dearly. Forced relocation, runaway environmental degradation, and cash-strapped social programmes like education, healthcare, and social security systems have been tolerated for questionable projects, many with little practical use.