Amidst the story of Chinese city Dongguan (pop 10million) in the largest province is on the verge of bankruptcy, it has been reported that the Chineese Central Bank is going to join the party and get in on the “beggar thy neighbour” act. The injection of liquidity is to help foster a soft landing to an ever ailing economy. Over $57 billion to be added along with an investment of $1.6 trillion in infrastructure.

China´s Central Bank has decided to join the Fed and ECB in their ´pump in money´ move, injecting a record $57.9bln into the financial system. This is to help create a soft landing for the number two economy amidst the global turbulence.

Such injections can help cut lending rates, but full-fledged success shouldn’t be expected before 2013, Vedomosti daily quotes analysts from the Economist Intelligence Unit.

China’s Government is also trying to heat up its economy by investing $1.6trln in infrastructure.

Despite helping the Chinese economy out of the recession in 2009, such measures this time around could turn out to be inefficient, say HSBC analysts. Today the country faces problems of so-called artificial overheating: sky–high inflation is coupled with a “destructive bubble” in a housing market and growing debt, analysts specified.

As the global economic outlook becomes increasingly gloomy, export oriented China, sometimes referred to as the World Workshop, is set to grow at a much slower pace of around 7% over the next decade, Jim O’Neill, Chairman of Goldman Sachs Asset Management, told Reuters.

The profits of Chinese industrial giants fell 6.2% year on year in August to reach $60.4bln, following a 5.4% drop in July, says the National Bureau of Statistics of China.

 

Source: RT.com

Advertisements