People enjoy popsicle at central street in Harbin City. Rise in consumer spending drives economic growth. (Photo : Getty Images)
This year, China's economic growth rate is expected to recover as Chinese authorities gradually withdraw its policy stimulus and the rise in credit slows down, an article by U.K.-based The Telegraph said.
But on the supply side, China's growing influence in the world continues to rise, which could affect the West in various areas such as interest rates, inflation, financial market and trading trends.
Contrary to speculation that China is about to succumbed to a major recession or slowdown, it still managed to meets its growth target and posted a 6.7 percent growth in 2016.
For some, it is only a matter of time before China surpasses the U.S. to become the world's leading economy.
According to the report, China's position in the international GDP rank was fueled by the sheer number of its people, although its population has slowed and the number of people in working age has declined. The country's GDP growth, therefore, depended not on the increasing number of workers, but on the rise in output per head.
Although the country may be going through a transformation, it is facing challenges. Several state-owned enterprises are perceived to be inefficient, considering that 50 percent of the country's GDP is spent on them, the report said.
In addition, the financial system has not fully developed since credit is dictated, not by market demand, but by government people. Corruption is also a problem.
The report said that although the country still managed to achieve growth, it did not have the rapid growth that Japan, South Korea and Taiwan had experienced.
The reason for this is that China has to battle with inefficiency, old technology and poor investment, as well as improve its incentives and make better economic decisions, to enjoy the enjoy the rapid growth that its neighbors had experienced in the past.
Now the growth of its neighboring countries has declined and the faster China's economy grew, the more it needs to implement global best practice, the report said.
According to the report, China could maintain its growth and the progress that it has made in recent decades if radical reforms would be made. These reforms are seen as necessary to increase the country's growth rate and sustain its growth in the future.
