China: 8.7% Economic Growth in 2009

China did not actually achieved double digit growth in 2009 but 8.7% is even more valuable than double digit GDP growth in the year of great recession. In fact, in the fourth quarter of 2009, the GDP growth was 10.7% compared to the same time one year ago. This is good news for not only Chinese economy but also for the whole world. It shows that the stimulus package that the government of China allocated brought some good result.

The high GDP growth means perhaps something extra for the country because there is a strong possibility that China has now the second largest economy in the world. Japanese figures will be announced after a few days and then the official confirmation will happen.

What is the magic solution that China could find in the time of economic recession? What Chinese decision makers did was to shift the focus to domestic consumption. Because of the recession, export suffered but because of domestic consumption the products were sold in home.

For the time being, things look very good. It will be good if China really becomes a consumer based country like USA. However, 2010 will bring new challenge for Chinese economy because the high growth has to b sustained. 

Chinese Economy: Real Estate Sector is Becoming a Major Concern

Chinese economy suffered from global recession but now things are looking better. However, many people have turned to real estate. For many years, the GDP grew at a very high rate compared to the rest of the world. Many people came to the cities from rural areas and found work in factories and naturally when you have some more income then the first thing you look for is a land, house or apartment. Thus, even in the time of recession, the real estate market kept on growing and this continuous growth is turning into the main headache for the economy of the country.

The main problem is perhaps that except the buyers, all the other groups want to keep the growth in the real estate sector intact. Many housing projects are now going on and the developers of the projects don’t want to decrease the price. So, a crash is likely to happen sooner or later. It seems that there is no way out. The government is trying to control the situation but it is a very difficult thing. It is worth mentioning that nearly three decades ago similar thing happened in Japan and the Japanese real estate sector suffered a crushing blow and as a result, the economic growth of the country collapsed and did not recover fully until now. 

Chinese Economy: Time to Expand or Explode?

Right now, it seems that the worst impact of global economic recession is over for Chinese economy and it can again come back to the path of recovery and regeneration. The Economist has a good analysis about it: China's economy Not just another fake. It compared with the current condition of China with that of Japan in 1980s. That time, Japanese economy fell into problem and then never really came back. According to this analysis of The Economist, Chinese economy is not in a bad condition and it will not get busted.

Robert Salomon at Seeking Alpha does not agree with this kind of analysis of The Economist and I would ask you to read his view on it: Is China a Bubble? Two Opposing Views.

What do you think about the whole thing?