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China Economy Poised for Dramatic Fall
by Tom McGregor    Tue, May 18, 2010, 09:44 AM

Dragon Drop.jpgChina’s stock market has plummeted on increasing worries about Europe’s debt crisis and expectations that Beijing is about to enact strong actions to slow the country’s booming economy and prevent it from overheating after a spectacular rise last year, analysts claimed.

The International Herald Tribune reports that, “investors are worried that Chinese exports to Europe will slow in the coming months and that government efforts to tame this country’s economy by tightening credit will hamper a wide array of industries, including the nation’s fastest-growing real estate market.”

Even though on Tuesday, share prices in Shanghai rose modestly after dropping 5 percent Monday, the Shanghai Composite Index remains near its lowest level in a year, down approximately 21 percent this year.

Over the last few months in Hong Kong and Shenzen, stock prices have also dropped sharply, largely because Beijing is anticipated to raise interest rates and tighten bank lending to help rein in surging property prices and inflation.

This year in Hong Kong, the Hang Seng Index is down about 9 percent.

According to the International Herald Tribune, “China’s economy has been red hot since late 2009, when Beijing’s huge economic stimulus package began to kick in along with record lending by state-owned banks. In the first quarter of this year, China said its economy grew 11.9 percent.”

Chinese stock prices soared with aggressive lending to help revive China’s building boom. The Shanghai Composite Index last year rose about 80 percent, making it the best performing major global stock market.

Yet now, with mixed signals about a the prospects of a strong global recovery by the end of this year, analysts believe that Chinese investors have become wary.

To read the entire article from the International Herald Tribune, link here:

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Comments (2)add comment
written by Ben Gee , May 19, 2010

Chinese authorities drive China's economy like a car. When it is going too fast, they apply the break, and when slowed too much, they add more gas. The goal for China's grow is a modest 8% and inflation 3%. So far, China is meeting its goals. Whether China can maintain inflation at 3% or not in the future is a $ 640 billion question.

written by Ben Gee , May 21, 2010

The China stock market is falling but will China's economy follow? Did anyone not know that China did not have a stock market until very recently? Even if China's stock market evaporated, China's economy will not follow for the following reasons.
1. China has lots of room to grow in many areas such as, China has 30-40 cities with population up to 3 million that can use a subway system.
2. All major cities can use a garbage recycling systems.
3. China has over $ 1 trillion dollars saving can be used to simulate the economy if needed.
4. China need 200-300 million units of low cost housing.

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