Chinese Loans – Pathway to another Recession?

admin — Mon, 16 Nov 2009 05:59:18 +0000

With the whole world yet stuck in recession, China is probably the only one that is unaffected by this global trauma. With the growth rate of 8.9% in the last quarter, china’s economy is booming and is expected to improve more during the rest of the year. As stated by Mr. Xiaochao, spokesman for National Bureau of Statistics, the condition of the Chinese economy is very stable and good at the moment.

With everything going great with the Chinese economy, many experts believe that China is creating what is called a “bubble” economy, the economy that will burst for sure one day. The American economy burst happened because of them providing very easy credit. In the case of China, they are giving loans to just about everyone. From the beginning of this year till now, 1.27 trillion dollar has been given by China as loans to Americans.

A study has shown that lending by China has reached 140% of GDP at midyear. This kind of lending has created crises earlier. A lot of Chinese money is going into projects which are unlikely to generate great revenues. According to some leading economists, these loans are allowing manufacturing of goods at large scale which isn’t needed since consumption isn’t increasing at such a large level.

Though it seems the China has realized the problem. Chinese officials are debating how to recover their loans faster. Also, their loan giving rate was much higher in the beginning of the year as compared to what it is now. Also, China plans to solve the problem of excess capacity in certain sectors by forcing factories to shut down and forcing few to go for mergers.

We just hope that we don’t have to face a new recession soon.

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Europe out of Recession

admin — Mon, 16 Nov 2009 05:53:01 +0000

The European economy is improving and seems to have come out of recession. This conclusion is based on the fact that between July and September, the economy has grown. For all the countries that use the Euro, there was a combined growth of 0.4 %. This has happened after shrinking for 0.2% between the month of April and June. The French and German economies both grew consecutively for the second quarter indicating that both of them, which also happen to be the biggest economy of the eurozone, are out of recession. But a point of concern has been that the growth hasn’t been as much as expected.

Also, the whole of Europe including the countries not using Euro grew 0.2% in 3rd quarter and hence coming out of the recession. While others have grown, UK’s economy has gone down by 0.4% in the 3rd quarter. The economy has been going down for six consecutive quarters.

The German economy has come out of the recession much faster and earlier than many experts had predicted. The main concern is UK’s economy, the second biggest economy of Europe, which is still contracting. This shows how hard hit was UK by the global recession. UK’s financial sector accounted for bigger portion of their economies and hence UK was affected more because of the recession.

Leaving Spain and UK, every other economy in Europe has recovered from recession.

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Chinese Loans – Pathway to another Recession?

Europe out of Recession