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China on the verge of an economic crisis in 2013?

China is on the verge of a challenging economic period, and while most economists agree, there are two overlooked reasons as to why the impact will not devastate the nation.

china business

china business

China’s looming economic crisis

Li Zuojun, researcher of the National Research and Development of the State Council, gave a speech in 2011 stating that an economic crisis will fall on China in 2013. He predicted that around July or August of 2013, a huge economic blow will befall China. While he named four main reasons, two stand out the most. They are:

  1. Real Estate Bubble Bursting and local government debts
  2. Evacuation of international investments

The news of 2013 being the year for impending doom didn’t strike me as odd, since there have been murmurings in the international circles of a big economic crisis from abroad. While many Americans thought the crisis would come from Europe, China slow crept up in the ranks of nations with large debts and bubbles ready to burst.

The two obvious reasons were stated in Li’s findings. With such a fast growing middle and upper class, a real estate or investment bubble of some kind was inevitable. I agree with my international colleagues in forecasting August 2013 as a test of China’s fortitude on the global stage, but I also think that China is primed and ready to emerge successful for a myriad of reasons, particularly the following two:

1. Diversification

While the crisis has been looming, China has been investing abroad and forging meaningful relationships with Africa, México and Europe. While the middle class may be heavy ladened with a large real estate albatross, the rest of the nation has its eyes turned toward meaningful manufacturing, political and natural resource investments. Even if the international investments are leaving China, Chinese yuan are following the money overseas.

2. Intention

Since China’s goal is to be a world power, a small blip on the local real estate scene will have negligible effects on its greater world contributions. China is focusing on charitable givings, better partnerships and self-audits. So even if an economic crisis is imminent, China will find a way to spin it for something positive. Because so few people actually own real estate, the bubble itself is being inflated in the media. China’s investments in military defenses and infrastructure will prove to be a more sound investment.

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While some are purporting the demise of China, I see this as a great opportunity to take stock and reevaluate China’s success factor on the global scale. This economic crisis in terms of a real estate bubble may just be a forerunner of a booming 2014.

Written By

Monica Moffitt, founder and Principal Cultural Consultant at Tianfen Consulting, Inc., has traveled the world and enjoys linguistics and all things culture. Having split her career between project management and business analytics, Monica merges logic, fluency in Chinese and creativity in her new role as cultural consultant. She received a Bachelor of Arts in East Asian Studies/Chinese from Vanderbilt University and a Master of Business Administration (International Management and Marketing) from University of Texas at Dallas.

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