Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
financial trap
Economy

The Chinese government can expect a financial trap

07.04.2021
2 min read

Financial trap for China: causes and consequences

The pandemic has severely hit China’s economy, and its consequences are still felt in the country. According to experts, the country faces a financial trap in case the authorities change their approaches to fiscal policy. As a result, income may decline significantly, and spending cuts will not yield positive results.
The problem of growing deficits in China forces the government to revise the spending part, but then the government cannot count on intensive economic development. With spending cuts, GDP will not increase by more than 2.5%, and with these figures it is difficult to plan for a number of future operations, including the number of jobs. In such a case, China’s macroeconomic stability may be jeopardized.
The first quarter of last year showed a 6.8% decline in GDP. In the second quarter there was already a noticeable economic recovery and it gave a 3.2% growth. Only till the end of the year the country has registered the development at the level of 2.5%.
However, there are also problems in some segments of the economy. The consumer sector, which provides about 55% of the country’s GDP, has been particularly affected. Here the indicators have decreased by almost 4%. This situation is due to the decline in purchasing power of the population, which was caused by the crisis, production stoppage and business closure. Therefore, one of the priority tasks for the Chinese government is to introduce measures to stimulate demand and improve the solvency of citizens.

financial trap

In May last year, the authorities said that they would not set targets for GDP. The cancellation of economic growth planning occurred for the first time since 1994. The government explained its decision by the fact that the pandemic brought uncertainty not only into the internal processes of the state, but also had a negative impact on the global situation, and it is difficult to predict further recovery.
In addition, in 2020 the country increased the state budget deficit coefficients, the values of which reached a maximum in the last 10 years. For example, in 2019 the deficit was 2.8% of GDP, and in the past it was raised to 3.6%. The government also increased the unemployment rate, and in 2020 it was 6% against 5.5% in the previous period. Beijing has revised the target, which controls job creation in cities. It dropped from 11 million to 9 million.
Defense spending had to be cut, although it was the first time since 1991 that the government cut in this segment. However, Beijing hopes that these steps will allow the country’s economy to restore the pace of development in the shortest possible time.

Tags: Global Economy
0
Previous Post Ingvar Kamprad: biography of the founder of the famous IKEA store chain Next Post Tencent company pressed Facebook and became the leader of the social networks segment

You Might Also Like

Iraqi authorities
Economy
Iraqi authorities offer foreign companies to join gas field development
10.08.2021
Portugal's economy
Economy
How Portugal’s economy recovered from the crisis: the country’s experience
30.08.2020
uranium production in Germany
Economy
Germany finally phased out uranium production
21.02.2022
Turkish authorities
Economy
The Turkish authorities have imposed restrictions on working with the national currency
29.09.2020
PGNiG
Economy
PGNiG intends to reduce its dependence on Russian gas
24.09.2020
Egypt's economic growth
Economy
Government boosts Egypt’s economic growth
12.05.2025

Popular Posts

  • Li Ka Shing: How can success be achieved without money and education?
  • Skolkovo analysts: the Russian energy market is suffering losses
  • Ingeborg Mootz: a woman who became a stock player at the age of 75
  • Analysts: Egypt’s economy to continue falling in 2023

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Spokesperson
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Spokesperson
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Spokesperson
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Spokesperson
16.05.2020

Popular Posts

  • Li Ka Shing: How can success be achieved without money and education?
  • Skolkovo analysts: the Russian energy market is suffering losses
  • Ingeborg Mootz: a woman who became a stock player at the age of 75
  • Analysts: Egypt’s economy to continue falling in 2023
  • Businessman Chuck Feeney: the man who gave the world Duty Free
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram

© 2024 CHASLAU KONIUKH. ALL RIGHTS RESERVED. Expert in marketing and project management, international investments, financial analyst.

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics