China’s debt-fuelled economy expands 'oh so smoothly'

Fidelity International

Higher wages are making China a less attractive hub for manufacturing exporters and foreign companies are pulling production from China or relocating planned plants elsewhere. Foxconn from Taiwan, for instance, which has long made iPhone components in China, plans to build 12 factories in India that will employ one million workers. The most readily available weapons Chinese policymakers have to combat the loss of competitiveness and export-related jobs are to reduce the yuan and to suppress wages growth, options that thwart the modernisation drive. If China’s policymakers are to ease up on debt stimulus and reduce their yuan manipulations, the question begs; how is China to maintain an economic growth rate of 6.5% to 7% when its modernisation drive is so fragmented and risky? (VIEW LINK)


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