China Policy of State Support to Companies May lead to Major Financial Crisis


Once the booming economy and the backbone of worldwide manufacturing is now reeling under tremendous pressure from all corners. China current generation of youngster never understood the meaning of economic downturn and always went from one step of growth to another. Chinese government did fabulous job in opening the their economic in a very controlled environment without losing the control of economy for the last 30 years and now giving direct competition to world power like USA, Russia and Japan.

Chinese government realized that if they want to get powerful in all front then they should be good in infrastructure as well as very strong export. For export Chinese government offered packages to local SME and SMB to start the manufacturing center and hire low cost of resource to keep the cost of the product low and then played around with their currency to maintain the trade surplus with most of the countries they did business.

The overheating of economy coupled with Global economic slowdown especially in Middle East impacted china hard. Most of the government funded companies started falling apart as well as private companies who took loans from banks start facing servicing their debt.

The stock market crashed and government were forced to jumped in and also devalued their currency to keep themselves competitive in the marketplace. It is correct that China is having sufficient foreign reserve to sustain the downturn but also having sprawling economy and population to support.

you take any industry and they are sitting on over capacity and dumping it to other countries which is creating lots of resentment about Chinese companies trade practices. The way India impost MIP (Minimum Import Price) to protect its Steel sector, I am sure other EU countries especially UK will be doing so soon. It wont be too far when the action by partner countries will impact the job market which will lead to mass layout in their core sector which will lead to more financial problem. I strongly believe that China government must be working on formula to reduce the capacity to ensure that their companies dont get the dent in any form

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