Analysis of Macroeconomic Indicators of China

Topics: Macroeconomics, Inflation, Monetary policy Pages: 5 (1595 words) Published: November 5, 2012
Analysis of Macroeconomic Indicators Of China
Macroeconomic Indicators along with values is provided in the below table Macro Economic Indicators| Value|
GDP Growth Rate| 9.1%|
IIP Growth Rate| 14%|
Agricultural Growth Rate| 4.3%|
Fiscal Deficit| 800 billion yuan|
Interest Rates| 6.56%|
Exports| 180.2 billion USD|
Imports| 148.5 billion USD|
Current Account Deficit| 59.8 billion USD|
Inflation| 7.65%|
Foreign Exchange Reserves| 3.24 trillion USD|

GDP Growth Rate:
* GDP (purchasing power parity) of china is $11.3 trillion second largest in the world. * Most of the GDP is comprised of the exports. China is an export based economy. * GDP of China rose rapidly over past 33 years, Chinese households do not appear to have shared equally in that growth. * The Growth rate of GDP is averaged at 10% from past 5 years. Even during recession periods china GDP continuously grew at an average rate of 9%. There is a serious concern in the distribution of china’s GDP in which household expenditure and private consumption is low. * Falling share of private consumption and disposable income relative to GDP is largely caused by two main factors: China’s banking policies and the lack of an adequate social safety net. Chinese households put a large share of their savings in domestic banks. * The Chinese government sets the interest rate on deposits. Often this rate is below the rate of inflation, which lowers household income. Social safety nets such as pensions, healthcare benefits are low in China because of which savings are more in that country, which results in poor spending. * Proper measures in increasing the household expenditure will make china as more independent. IIP Growth Rate:

* Industrial production measures changes in output for the industrial sector of the economy which includes manufacturing, mining, and utilities. Industrial Production is an important indicator for economic forecasting and is often used to measure inflation pressures as high levels of industrial production can lead to sudden changes in prices. * Industrial Production in China increased 9.5 percent in June of 2012. * The industrial sector includes manufacturing, mining, and utilities. Most of the US firms’ manufacturing division exists in china because of the cheap labor and highly skillful. * China’s IIP growth effects the movement of Wallstreet indexes because of large US manufacturing base.

Agricultural Growth Rate:
* The Agriculture; value added (annual % growth) in China was last reported at 4.30 in 2010.

* 50% of china’s population is involved in agriculture. Even though most of the China’s land is unused for agriculture china could be able to maintain a steady growth rate in agriculture at 10%.

* During past 30 years china has seen a dramatic shift from a closed trade country to a market oriented economy. * Agriculture is a vital industry in China, employing over 300 million farmers. China ranks first in worldwide farm output. * China’s agriculture is a diversified composition compared to India because of which it outstripped India in this sector. * Technological advancements have been the major reason for growth of agriculture in china. Fiscal Deficit:

* It is the net value of total government’s income negated from total government’s spending. * Chinese government is trying to improve structural factors of the country in order to promote household consumption which is a major drawback of India. * China reported a Budget deficit equal to 1.1% of the country's GDP in 2011. * Both the central and local governments will see their fiscal revenues exceed the budgets as a result of increasing intake from import taxes, corporate income taxes, value-added taxes and consumption taxes. * Imports, industrial profits, industrial added value and consumer prices have contributed a lot to the growth of revenue.

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