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China’s Growth Rate Is Slowing As China Consolidates Its Communist Party and State Operations

ArmchairTechInvestor, March 27, 2018, by Brad Peery

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China is targeting a growth rate of 6.5% in 2018, following an increase of 6.9% in 2017. As part of the changes that have occurred since President Xi became China’s leader for life, the government is reigning in risky lending practices, revamping the state’s bloated state sector, and has also espoused attracting foreign investment. This latter objective does not seem to be likely, in view of how China treats foreign companies that want to develop their operations in China. Trade tensions with the U.S. are also an issue. President Trump has proposed working with China to reduce the trade imbalance with the U.S. by $100 billion, over 25% of the U.S. trade deficit with China. This might be accomplished over several yeas, and could be an alternative to a trade war.

On a separate front, India has become the large country with the highest growth rate, replacing China. Both countries have about the same size populations, but India has lagged China in developing its economy. India’s economic growth problems have improved. In the last quarter of 2017, India’s economy grew by 7.2%. In the first half of 2017, Mr. Modi voided most of the currency in circulation and put in a nationwide goods and services tax, causing uncertainty and consternation that took the economy below a 6% growth rate. The reforms implemented by Mr. Modi were aimed at stemming corruption and aiding cashless transactions. The banks in India are struggling and a $32 billion capital infusion was implemented in October 2017. Areas of the economy are growing but exporters are struggling
*Beijing Sees Growth of 6.5% This Year, Wall Street Journal, by Lingling Wei and Chun Hong Wong, March 5, 2018
**India’s Growth Zooms to Global Lead, Wall Street Journal, by Anant Vliay Kala, March 1, 2018

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