Chinese empty cities - Is China capable of sustaining economic growth

Over the years China has built up a whopping trillion dollar foreign reserves has now aimed at increasing it's GDP growth to 10% anually.

And how is it planning to do this ? It's gonna spend.

With enough financial resources china has got way too freedom to spent and built infrastructure.

China has planned to built cities and infrastructure on the rural areas with the intentions to mordenise it's interior (which is still not developed).

We are all aware about china being the host in the beijing olympics 2008.

Yes, and we also know that china has built 2 most recognizable venues, the “Birds Nest Stadium” and the “Water Cube” expilicitly costing half a billion alone.

Not to mention the expenditures after the games the Chinese had to bear i.e over 9 to 12 million anually

Are Chinese people happy about this

Or are they even allowed to question about this.

The Chinese government is still not transparent about the way they spend the money.

Chinese people on the streets have a very little idea about how much the Olympics would have cost..

These were the points noted out by the Journalism Professor Zhan Jiang on 31 july, 2008 BBC news article.

The very question that arises is that is any country legitimately spends $44 billion on the single event.

The answer is No they can't,

China is ruled by a communist government where there the free speech and media are resticted.

The main reason why china's stimulus spending is that unlike free market economies china is totally export based. It has been keeping it;s currency low in order to encourage it's exports.

the problem here is the Chinese economies has become so dependent on exports that with the decline of exports the surplus goods manufactured remain in stock nobody to buy.The surplus goods that are manufactured cannot be absorbed within the country as there is nobody there to buy them.

Unlike free market economies the y allow their currency to float due to which even if there is an exports decline the country can still be recovered as these goods can be absorbed into their own country.

On the other hand china gains an upper hand since hey are not constrained by the economics of their endeavors. China can build whatever it wants and does not worry about it being even worthwhile or economically viable.

China has been trying to raise its GDP growth to more than 8% in order to sustain job Growth in order to absorb the new influx of work force from it's huge population.

China's built up foreign reserves have freed its hands to achieve a stimulus spending.

The year 2008 saw a major decline in the world economy causing china's biggest customers USA, EU, and Japan to enter in to recession.

The Chinese exports declined by 20% that year resulting in an enormous slowdown in their export-based economy.

The members of the Communist Party of China’s politburo would attend a meeting to deal with this crisis.

The government has created a stimulus measures in order to create a stimulus with the help of state sponsored companies in order to keep the economy from getting stagnated and thus continue to maintain social stability and order.

Along with this the govt. has created an industrial commercial overcapacity and imbalance in the estate market.

Which would begin to go out of control if the stimulus spending continues.

See South china mall

The mall 7 million sq ft retail and entertainment complex finished in 2005.

The estimated cost amounts to $1.3 billion.

The mall is a mixed theme based with a Las Vegas style and Disneyland entertainment on a large scale.

The mall is amazing, but there is a problem.

It’s nearly empty.

The real question which arises is that how long this is going to go on.

For how long will the govt. be spending on it's infrastructure and cities like this

If this policy succeeds i.e. if the economy recovers and the EU and USA and Japan revives from recession and the Chinese exports would shoot up then the economy would be on it's path towards GDP growth

But what if not,

What if it takes more time for the economy to recover than expected, what if the exports dont go up and the world doesn’t demand for the Chinese products any more, then china is up for a big time

Then the stimulus spending would render Chinese into depleting its foreign reserves making its economy weak and stagnant or even negative GDP growth.

In the time of economic crisis the solution is not to stick to your position any way but to try and solve the problem which china has failed to notice. What ever the case may be the Chinese govt. is playing a narrow game

See more: China loses 20% of annual coal production every year