From Overseas Press

Danger hampers China's fast-growing success

(chinadaily.com.cn)
Updated: 2011-04-13 16:53

Although China's economy has grown at the phenomenal annual rate of around 10 percent during the past three decades, there are still three problems that hinder its continued development over the next few years, according to an article in the Wall Street Journal on April 11.

The first problem is if "the property bubble bursts". The Chinese government is trying to deflate the bubble by increasing mortgage down payments and introducing property taxes, but, according to the article, "that may not be enough. Local governments depend on revenue from land sales to fund their operations."

China specialist Nicholas Lardy warns a real-estate collapse "could shave 2.5 percentage points off Chinese growth, a deeper hit than the country took at the start of the global financial crisis".

The second is "unbalanced rebalancing". China's economic strategy that ensures its rapid development by massive investments may be losing steam, the article cautions. "Although investment has risen to nearly 50 percent of gross domestic product, job creation is limping along at one percent a year. China's exports, meanwhile, are unlikely to match the pace of past years because of diminished demand in Europe and the U.S."

The last, the article says, is social stability. Land grabs by local authorities and other abuses of power as well as rising inflation could produce discontent among the public, which would plunge the economy into stagnation.