Myths about China's economy

5 popular misconceptions about the Chinese economy.

Number 1. China has become a world economic power, while the U.S. and Europe will be the "periphery."

Myth!

Even if the Chinese economy will overtake the U.S., by such indicators as "per capita GDP," China will still be much poorer than America. Besides, China can not grow forever. With increasing wealth the economy slows. Everybody remembers a fast-growing Japan, which stopped and stagnated all the 1990s.

No. 2. U.S. Federal Reserve can print as many dollars as they wish, while the Chinese yuan is much more reliable than the U.S. currency.

Popular, but incorrect assertion.

In today's world the value of the currency is determined by supply and demand for it. And demand is determined by the amount of goods that can be purchased for that currency. In a world where there is no "gold standard" is incorrect to speak of "insecurity" of a currency.

As for China, there has been growth in money supply by one of the fastest in the world. And the ratio of the monetization ratio to GDP reaches nearly 2 to 1. For comparison, the United States the figure is 65%.

The rate of growth of money supply in the United States, including all of the quantitative easing program, well below the growth in China. And in the Middle Kingdom money supply is growing at 30% for the fourth consecutive year.

No. 3. Economy of the U.S. and Europe are doomed, as mired in huge debts. Against this backdrop, China has gone far ahead.

That's not true!

This is another striking example of illogical judgment. The same problem (in both developed and developing countries) due to a boon for China, and also a disaster for the West.

The solution of debt problems in developed economies is usually associated with austerity measures. However, if we look at China, it turns out that the country is also borrows and spends well as all the rest of the country.

In addition, China has large cash resources of $ 1 trillion, which he can throw at sustaining economic growth. At the same time, mind you, nobody comes up with apocalyptic scenarios for the Chinese economy, as do the "gravediggers" of America and Europe.

The solution to the debt crisis lies not only in the austerity measures, but also in the correct monetary policy.

No. 4. China can stimulate economic growth in a way that will be released from any slowdown, while monetary incentives in the U.S. and Europe are working inefficiently.

Again, not true!

Many believe that all that bad for the West - is good for China. It is believed that the U.S. and Europe are on the way the Japanese, who with endless rounds of quantitative easing, and can not restore sustained economic growth.

By the way, it is worth noting that China, too, is free to print money. If Celestial includes "printing press", then, of course, it helps to avoid a long recession. But the fact that a similar act of the United States, when the Fed prints dollars, is seen by many as the printing process of "empty green pieces of paper."

Unfortunately, not everyone is saying that China is now Japan is very similar to the late 1980s. (Or the U.S. in the late 1920s.), Who had a trade surplus, inflated real estate market, an aging population and huge reserves of foreign
 
currency.

No. 5. The presence of China's foreign exchange reserves of $ 3.18 trillion suggests that the citizens of the Middle Kingdom is incredibly rich.

Delusion!

People who say that such a stock of reserves indicates the wealth of the country, did not specify many details. Namely, the fact that these stocks do not citizens of the country.

Huge stock of foreign exchange reserves due to the fact that the Chinese monetary authorities to intervene in the foreign exchange market, by encouraging domestic exports. To artificially low yuan is needed foreign currency. To purchase the Chinese central bank releases additional funds. That's it.

So the amount of foreign exchange reserves says absolutely nothing about the welfare of its citizens, not to mention the fact that this issue is "ill-conceived run the printing press."