The Chinese economy has in recent years undergone a series of boom and recesses making it increasingly difficult for investors to realize substantial profits margins due to complexity in differentiating the boom and recesses. The past 30 years have seen China’s economy massively grow by triple figures to be among the world’s leading economies despite being merged with fraud, enormous wastage of resources in addition to theft of public resources by powerful individuals in the government.
The tremendous Chinese economic growth has come with numerous employment opportunities with hundreds of millions of the Chinese population being employed in manufacturing industries found across all major cities across the country. The overall effect of increased employment in China is that the poverty levels have increasingly dropped in addition to massive infrastructural developments were state-of-the-art transportation hubs, high-speed trains, sophisticated telecommunications systems have been launched. The rapid advancement of infrastructure has also significantly contributed to economic growth.
While the Chinese economy has grown massively in just a few years, it has witnessed massive wastage in addition to a high corruption rate. With the GDP standing at 45%, close to half of the investments in the country go to waste in the form of ghost cities constituting of modern skyscrapers, apartments, hotels, and advanced transportation networks but with no occupants.
The issue of wastage through ghost cities has in most cases been denied by government officials claiming the cities were developed for future generations. These claims do not add up as occupants are the key reasons why cities should be built in the first place. With time, these ghost cities will become obsolete and will indeed be a total wastage of scarce resources and time.
China is a communist country thus such wastages are usually sanctioned by communist government officials who view the projects as essential sources of employment opportunities to employ the vast unemployed semi-skilled Chinese population.
Despite China reporting annual GDP growth of 6.8%, the actual GDP reduces to 4.5% when massive wastage amounting to unprofitable dead investment are factored out. The 2014-2016 collapse of Chinese capital accounts clearly evidenced China’s ailing economy. The situation was further worsened by lack of policies to deal with the liquidity crisis effectively.
China’s weakening economic situation has further been worsened by the frosty trading relationship between the country and the U.S. The trade war between China and the U.S has seen the U.S increase export duty on all Chinese exports resulting to an extremely high cost of importing goods from China. The increase in export and import duty had greatly reduced the importation of goods from China at a time when the country was counting on substantial trade surplus in the form of imports to service its loans.
With U.S president, Donald Trump intensifying trade wars between the two nations by increasing the trade tariffs, the situation is expected to worsen, and Chinese should brace for though time ahead. The weakening Chinese economy has caused ripples across the global economy creating panic in the numerous nations depending on China.
The situation can only be saved through negations between the presidents of the two nations to come up with a workable framework that would mutually benefit the two nations. China’s president should put his ego aside and act swiftly and intelligently to save the looming economic collapse.