Tuesday, November 04, 2008

Impact of Global Meltdown on China

This could be the biggest challenge for the most populous country in the world. For decades China has been growing by being the world's manufacturing base. Prosperity had kept the dissenters from voicing their thoughts against the communist regime.

All that is now set to change. With the slowdown, will come slower growth(the GDP growth in China for 3rd Quarter is already come down to 9%) and joblessness and with it will come mass unrest putting great strain on the country's political system.

Unless China can generate internal consumption to keep its people engaged and prosperous the political scene could change there in the next 3-4 years. There will be a meltdown in coming years. How long can the govt differ it is to be seen.

What could help is large scale govt spending on Infrastructure projects and welfare schemes. Good news is that with 2 Trillion dollars they have the deep pockets to make it happen. How well they manage it still needs to be seen. One thing is for sure, in this Global Financial Crises, the stakes for China are as high as for US.

No comments: