China at Crossroads- A brave premier meets the realities of economy

Lately, there has been a lot of talk about China being on the golden road to the Promised Land. The Chinese Premier Xi Jinping embarked upon a rigorous restructuring drive to revive a halting economy- literally tearing the existing system to the ground and deploying powerful new trade initiatives and incentives to ease away the Chinese economy from its traditional dependencies. The premier’s shock therapy has already created a worldwide furore- the Chinese economy is actually grinding to a screeching, pained halt. The Government is hoping that the needle of economic development doesn’t inch towards the dreaded 5%- a far cry from the ‘assured and confident’ 7%.

Let’s get it straight- Chinese exports were falling well before President Xi Jinping came to power in March. Already economists were painting a dark picture about what was to come for the Chinese economy and the World sat on tenterhooks to await Jinping’s next move. The way it looks, he had no choice but to change the nuts and bolts of the aging economy. Of course, reforms and change often works when there is growth and a positive economic outlook- lack of these, and everything that is done would be a gamble. Xi Jinping took up the initiative- kudos to that!!

What the Chinese Government needs now is a big sized miracle. Reasonable growth must be evident before more radical reforms can be employed. Prodding at this sapling will hasten its demise- a period of silent growth and consolidation is required. Also, Xi Jinping must resist the temptation to throw new cash into the economy in the face of a multitude of businesses and Chinese people who are silently clamouring for a scapegoat. Doing so will arrest all the bold initiatives taken thus far!!

China’s present troubles stem from a history of plentiful and mispriced credit, unplanned international debt fuelled by Government financing vehicles, bigtime infrastructure projects funded by this cheap money and a general lack of accountability in the face of an encouraging double digit growth figure. Of course, reversing the years of economic abuse will take time, and spring forth a lot of shocking revelations. Xi Jinping must surf through these choppy seas if he plans on seeing his pet project bear fruits. Amen to that!!