China's Industrial Production Growth Continues To Slow As Inflationary Pressures Build, Making The Communist Party Look Less Effective

Monday, September 10, 2012 07:02
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China's Industrial Production Growth Continues To Slow As Inflationary Pressures Build, Making The Communist Party Look Less Effective

Tags: China | economic indicators | world economy

China’s most recent economic reports show that the world’s second-largest economy could slip to its lowest level of growth in over two decades. Over the past three years, imports have fallen unexpectedly by 2.6% and exports have risen by 2.7%. Production increased by 8.9% based on National Bureau of Statistics reports on September 9.

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Inflation is also on the rise for the first time in five months. That along with excess capacity in some industries and bad bank debt as a result of previous easing of monetary policy is showing the consequences of multiple economic stimulus efforts.
 
This bodes ill for the Communist regime. So a second round of easings will include cuts to bank reserve requirements as well as further fiscal stimulus.
 
Exports to the European Union from China dropped 12.7% in August from the prior year. A Chinese economist noted there is little the Chinese government can do about weakening demand from overseas. Job growth in urban areas of China also has slowed since late spring.
 
Challenges in export growth will only get worse over the long term and China is beginning to lose many of its cost advantages as labor and resource costs continue to rise. The August increase in industrial production was the weakest since May 2009.
 
Analysts say that monetary policy will need to become significantly more aggressive if China is to stave off the rapidly deteriorating economic picture.

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