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The communist country was once an extremely backward and rural country before the great economic reform in the late 70s. Under their first leader,Mao Ze Dong, China then mainly focused on agriculture sector and heavy industries like coal mining and steel production. Soon after his death in the late 70s,his successor made plans for China's economic reconstruction and today China has continued to achieve economic prosperity and growth over the past few decades and today it has emerged as one of the world's leading economies. However in 2015, China's economy declined and this affected the interdependent economies of the world negatively, worrying many economists, leaving them wondering whether and when would China walk out of this difficult times.

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Youth unemployment in major cities in China and inclusion of the rural population

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Youth unemployment in major cities in China and inclusion of the rural population

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The unemployment rate for China is quite high as compared to other nations with similar economic background as China. This is because many locals living in the rural parts of China are included in the labour force participation rate although they are not working, making the numbers very high. Hence, inclusion of the rural population into the workforce can both increase the labour force participation rate as well as decrease unemployment. With that, the Chinese government has put in place certain policies to help the locals in the rural areas pick up skills so that they can contribute effectively to the workforce.
Additionally, since the youths that are above 15 are included in the labour force participation rate, the government is encouraging them to work part time so as to help contribute to the economy of the country.

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In China, their GDP is divided into three main groups: Primary (farming, plantation etc),Secondary( Construction and Industry) and Tertiary (Trades etc).  The Secondary group is most crucial to China's economy given China's large population size. China has ample of land ,natural resources and most importantly cheap labour and these are main reasons why many countries chose to manufacture their products here. This directly caused an increase in China's GDP.

Reasons: The bigger an economy gets, the harder it is to keep growing. China's working population and investment was at its peak in 2012, and has been lowering afterwards. China's technology gap with richer countries has also narrowed, which means productivity growth will decrease too.

Magnitude & impacts: an all-time low economic growth rate slowed to 6.9%, never before in the last 25 years, services account for half of the GDP, two-sided growth picture - heavy industry weighed on and light industry with pricing power greatly exceeding that of heavy industry, substantial rebalancing from severe downward pressure on output prices in overcapacity sectors, stock markets intially climbed around the region before all sliding back or into the negative territory, Shanghai Composite 20% down from December high & trading 40% down from 52-week high in June, China's power generation first annual decline since 1968 dropping 0.2% from 2014, financial services had a bad reputation after the margin financing crash.

Trend: According to this article, China's Real GDP growth rate declined to a 6.9% and although this figure does not lift China out of this dark times, it is still a comforting sign for economists and the Chinese government that China is still performing well. However as compared to previous years, the communist country has disappointed in GDP growth rate and figures have dropped from 7.7% in 2013 and 7.3% in 2014 to a new-low of 6.9% in 2015. However their GDP based on current prices have increased marginally from USD 10,430.7 billion in 2014 and USD 10,982.8 billion in 2015.
(World GDP Ranking 2015 | Data and Charts,2016) Also China's secondary group declined to 6% however their tertiary sector expanded to 8.3%.

Government policies to curb this problem: To mitigate the negative effects, the Chinese government is planning to come up with policies that " interest rate and reserve requirement ratio cuts from the central bank, the People's Bank of China". Fiscal policy can also be adopted to ensure that the country's GDP continues to grow. These are done to improve the economy especially when China is in debt, property markets and banking sector declining.

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China's economic growth rate slowed to a 25-year low of 6.9 percent in 2015, as the world's second-largest economy continues to shift away from its manufacturing roots.

China's economy grew 6.8 percent in the fourth quarter of 2015 from the same period last year, official data showed Tuesday.

The growth figures, still respectable by global standards, were in line with estimates for quarterly growth of 6.8 percent on-year, down from the third quarter's 6.9 percent, according to a Reuters poll, which also found economists expected full-year growth at 6.9 percent, down from 2014's 7.3 percent.

While secondary industry, or manufacturing, growth slowed to 6.0 percent in 2015 from 2014's 7.3 percent, tertiary industry, or the services sector, expanded by 8.3 percent last year, up from 2014's 7.8 percent. At the opening ceremony for the Asian Infrastructure Investment Bank on Saturday, Chinese Premier Li Keqiang said that China's economy grew about 7 percent in 2015, with services accounting for half of GDP.

"This is a good number," Jahangir Aziz, head of emerging Asia economic research at JPMorgan, told CNBC's Street Signs. "We've known for the last three years that the Chinese authorities are slowing down the economy. This economy is going to slow down," he said.

Others see signs of the economic rebalancing away from manufacturing and toward consumption and services.

"The growth picture remains two-sided. The real estate construction slump and weak exports continued to weigh on activity and prices in industry, especially heavy industry," Louis Kuijs, head of Asia economics at Oxford Economics, said in a note Tuesday. Oxford estimated that China's economy grew 6.3 percent last year.

"Meanwhile, though, consumption continued to expand robustly, supported by solid wage growth. This is supporting light industry and the service sector, where pricing power vastly exceeds that in heavy industry," he said.

The figures show "substantial rebalancing" in China's economy, but that's partly due to severe downward pressure on output prices in overcapacity sectors, Kuijs said.

But he added, "Notwithstanding the recent equity market turmoil, there are no signs of a more drastic slowdown."

He expects more government measures to keep GDP growth around the likely 6.5 percent target for 2016, including another interest rate cut, several reserve-requirement ratio cuts and expansionary fiscal policy.

JPMorgan's Aziz also expects a more-balanced view of China's economy ahead.

"In August, last year there was almost a fear that the economy was in free-fall. There was no policy support. I think all that has changed," Aziz said. "We will see the numbers going closer to 6.5 percent and more policy support. The policy setting has changed over the last two months. We're not going to see the kind of heartburn we saw last year."

Stock markets around the region initially climbed after the data's release, before quickly retracing gains. The Shanghai Composite climbed as much as 0.7 percent in the wake of the data, before retreating to trade flat, only to climb again later. Similarly, in Japan, the Nikkei tacked on as much as 0.78 percent, before sliding into negative territory.

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China's GDP growth slowed to 25-year low in 2015

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China's economic growth rate slowed to a 25-year low of 6.9 percent in 2015, as the world's second-largest economy continues to shift away from its manufacturing roots. China's economy grew 6.8 percent in the fourth quarter of 2015 from the same period last year, official data showed Tuesday.

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In economic terms, a person is only considered unemployed when he is able to work and is finding jobs but has not found it yet. Under the adult population there are two main groups under this- Labour force(economically active) and outside workforce(economically inactive). Those outside the workforce include discouraged workers and full-time students and on the other hand, both employed and unemployed workers are classified under the workforce.

Reasons: China is having troubles growing its economy. In order to cut costs and save money, more and more workers are being retrenched, resulting in high level of unemployment.  China's increasing population especially in those rural areas are causing the lack of jobs too.

Magnitude: China's poor performance led to retrenchment of 5-6 million state workers over the next two to three years, making it the country's largest retrenchment program yet.

Impact: With a high level of unemployment rate comes many costs. Firstly, the personal costs suffered by those unemployed. They would have to bear the embarrassment from their friends and relatives and if they were the breadwinner of a household, how and where can the family get money and unemployment incentives from? Answer is: The government. A government has to account and care for all its people regardless of the nation's economic status. As such the Communist government will have to adjust their budget to reallocate sufficient funds to help those families in need. Sectors like defence and healthcare may not get adequate fundings to function well, affecting the country.  Most importantly, social riots. When citizens are dissatisfied with their living standards they may choose to display their frustrations and voices via riots. Society will be in chaos then and innocent people's lives will be directly affected negatively. Also the rate of frictional unemployment will also increase. The amount of job vacancies in the country has significantly decreased and simultaneously the number of graduates in China is increasing due to population boom. Consequently theses new graduates will take much longer to find a new job to support himself and for some people, they may need to move to other populated cities like Shang Hai or Beijing or even other countries to work. This may lead to brain drain of the country.

Trend: China is facing an economic recession currently and the Chinese government is considering plans to layoff workers in the coal and steel industries(Heavy industry). As mentioned in this article, they are considering to layoff "5-6 million state workers over the next two to three years"(Shao,Spring,2016) which means that there will be lesser civil servants in the Chinese government. Simultaneously China will create more new jobs to solve the raising unemployment issue,ideally below 4.5% in 2016, and they will create plans to merge firms that are in-debt to ensure that these firms will go out of their crisis and achieve economic prosperity.

Government policies to curb this problem:

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BEIJING (Reuters) - China faces a tough battle to keep its economy growing by at least 6.5 percent over the next five years while creating more jobs and restructuring inefficient industries, Premier Li Keqiang said as he opened China's annual parliament on Saturday.

Growth of 6.5 percent would mark a ripping pace for most countries but would be the slowest in China in a quarter century as world's No. 2 economy grapples with gyrating financial markets, softening global trade and efforts to reduce environmental degradation.

"Our country's development faces more and greater difficulties ... so we must be prepared for a tough battle," Li said.

In 2016, Beijing will aim for an economic growth rate between 6.5-7 percent, as Reuters previously reported, with a consumer inflation target of around 3 percent and money supply expansion of around 13 percent, according to a series of draft reports ahead of the opening of the 12-day parliament.

Many investors had been hoping China would post an aggressive target for fiscal spending to prop growth.

But the draft goal of running a fiscal deficit equivalent to 3 percent of GDP, while up from the previous year's target of 2.3 percent, still disappointed some who had hoped for a number closer to 4.

"The budget deficit of 3 percent is not enough and should be increased," economist and former central bank advisor Yu Yongding told Reuters on the sidelines of the meeting.

Zhou Hao, economist at Commerzbank in Singapore, said the low figure may reflect concerns that a higher number would signal tolerance for another spree of debt-fueled growth such as that Beijing embarked on in 2009.

Moody's recently downgraded the outlook for Chinese sovereign debt, a move Chinese regulators said was unjustified.

"The pressure from rating agencies could be something China has to consider, indicating that China is cautious on rolling out large infrastructure investment that could result in long-term debt issues," Zhou said in a email.

KILL THE ZOMBIES

The reports provide a blueprint of China's aspirations for the next five years across a range of sectors and measures.

They show Beijing trying to strike a balance between holding up growth and restructuring underperforming industries, where so-called "zombie firms" are responsible for much of the country's corporate debt overhang left over from the 2009 stimulus.

In lead up to parliament, the government flagged major job losses in key coal and steel industries. Overall, China aims to lay off 5-6 million state workers over the next two to three years, two sources said, in Beijing's boldest retrenchment program in almost two decades.

Li said the country will create 10 million new jobs, address zombie firms through mergers, bankruptcies and debt deals, and hold the urban registered unemployment rate below 4.5 percent in 2016.

Seeking to improve the environment, Beijing aims to cap total energy consumption at 5 billion tonnes of standard coal by 2020 and set targets for improving water efficiency.

China will increase military spending by 7.6 percent this year, its lowest increase in six years, as it pursues a modernization plan that will shrink staffing.

Unlike previous years, the documents did not mention a specific target for trade figures, having missed their goals repeatedly in recent years.

Weighed down by sluggish demand at home and abroad, industrial overcapacity and faltering investment, China's economic growth slowed to 6.9 percent in 2015.

Economists widely expect it to cool further to a still-healthy rate of around 6.5 percent this year.

But slower growth raises the specter of social unrest, as the transformation from low-end manufacturing to high technology and services leads to rising structural unemployment.

FIXING MARKETS

Beijing hopes the country's financial markets can play a stronger role in supporting the economic transformation.

"We will move forward with the reform of stock and bond markets and increase the level of rule of law in their development, promote the sound development of the multilevel capital market, and ensure that the proportion of direct financing is increased," Li said.

The reassurance comes after Chinese markets erupted in 2015, with the stock indexes crashing, the yuan sliding sharply, and property markets in major cities spiked while smaller cities lagged.

Those moves prompted heavy-handed intervention from the government, leading some to question whether the Chinese Communist Party was capable of following through on its commitment to let markets play a "decisive role" in setting the price of assets.

Li said China will open its capital account in an "orderly manner" and continue to improve the exchange rate regime in 2016.

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monetary / fiscal policy / policy makers

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China aims to maintain growth pace, fend off unemployment in...

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China faces a tough battle to keep its economy growing by at least 6.5 percent over the next five years while creating more jobs and restructuring inefficient industries, Premier Li Keqiang said as he opened China's annual parliament on Saturday.

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Inflation is defined as a sustained and continuous increase in the general prices of goods and services in the economy. With inflation comes the erosion of purchasing power and individuals in the economy can purchase lesser during an inflation year. There are two causes of inflation- Demand-Pull inflation and Cost-push inflation and inflation is unhealthy to any economy. An index to measure inflation is the Consumer Price Index (CPI) which measure changes in the average prices of consumers goods and services.

Reasons:
Chinese governments strict currency control that had artificially depreciated the foreign exchange rate of the Yuan.

Cost-push inflation is inflation that is mostly caused by an increase in the cost of production. Increases in the cost of production can come different sources; for instance, wages, price of crude oil, prices of raw materials, construction, equipment and so on. It occurs when there is competition, or shortage of, resources to produce goods and services. The general price level in the economy is “pushed up” by the pressure on the cost of production.

Trend: inflation held steady as of April 2016. The consumer price index rose 2.3 per cent from a year earlier in April and also rose 2.3 per cent in March.

Impact(economy/individuals):
As China’s economy gains strength, and the American economy weakens, imported food & energy resources become ore expensive, consumer led demand causes a direct increase in business activities & production cost, pockets of assets bubbles forming in the China property market especially in first tier cities like Shanghai & Beijing. Furthermore in China, the rich are getting richer whereas the poor are getting poorer. With inflation going on, prices of goods and services are constantly increasing and when majority of the Chinese population is not earning more, they have lesser money to purchase items and this compromise the population's standard of living. Besides, anger and dissatisfaction towards the upper class would rise as the majority of the population see themselves struggling to make ends meet while others continue to live a wealthy and well-off live.

Government policies to curb this problem:
The appreciation of the RMB is one of the most immediate ways that China's government can limit the pace of inflation which is probably one of the most important reason that it is doing it.

Also, controlling money supply from the People’s Bank of China through controlling forex rates, sterilization process, printing currency, reserve ratio changes and discount rate changes are some measures China can adopt to ensure inflation is kept under control. (S. Seth, 2015). However it is important that China does not overprint to curb inflation as it may accidentally lead to hyperinflation where money becomes worthless. Controlling its forex rates is important as controls the amount of foreign currency flowing into the economy and thereby influencing the purchasing power of the Chinese Yuan.

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This page will focus on the causes and effects of inflation on China. China is fast becoming a key economic power.

This makes understanding the country's future inflation rate trends all the more important.

Please go ahead and learn more from the list of historical and current inflation rates, facts and news articles.

There are a few key factors that will continue to drive China's pace of inflation.

The more obvious culprit is the Chinese governments strict currency control that had artificially depreciated the foreign exchange rate of the Yuan. The cheaper Chinese currency was one of the contributing factors to a strong manufacturing and export business activity. But it also has its downside by making any imported food and energy resources more expensive.

China's unprecedented rate of development have contributed to a strong demand pull inflation. Rampant consumerism coupled with a large growing population will continue to drive the increase in consumer demand. This consumer led demand in turn cause a corresponding increase in business activities and ultimately production cost.

There is also the expectation of future economic development and potential appreciation of the Chinese Yuan (also known as Ren Min Bi, RMB). This has led to huge inflows of both hot money and legitimate long term investments into the China economy. The side effect are pockets of assets bubbles forming in the China property market especially in the first tier cities like Shanghai and Beijing.

In our highly interconnected world economies, the key to understanding the causes of inflation is to look at exchange rates, resource distributions across the different countries. The pattern of imports and exports will also play a key role in affecting each nations future currency strategy.

Here are some interesting events that will shape the People Republic of China's economy.

China is starting to selectively clamp down on speculative activities in the real estate and overheating of the banking activities. In this the government treads a fine line between doing too little with no positive effect or doing too much and causing a crash.

On the social front, there have been some rumblings of social unrest in some China cities. This should spur the government to be proactive in their fight against inflation. Being a large country it remains if these are isolated incidents or a sign of bigger social problems to come.

The Yuan currency have been allowed to appreciate slowly for the most part of 2010 and was still going strong in 2011. This is one sure way for China to effect of "imported" inflation with a stronger currency. Ironically, an expectation of currency appreciated can encourage more demand for Yuan denominated assets. This stronger demand might in turn stroke asset price pressures.

International trade can and do affect inflation rates in China. As an example, if China's largest import partner Japan appreciates its currency then the price in yuan essential imports into China will rise. Of course China can also choose to import less of non-essential items.

Based on 2010 figures, the total value of international trade of China was $2.115 billion.

From 2010 figures, China's total imports are valued at $921.5 billion. Its imports consists of 13.3% from Japan, 9.9% from South Korea, 9,2% from Taiwan, 7.2% from the US and 4.9% from Germany.

China's major export trade partners consist of the United States, Japan, South Korea, Taiwan, and Germany. Based on 2010 figures, China exports 17.7% to the US, 13.3% to Hong Kong, 8.1% to Japan, 5.2% to South Korea and 4.1% to Germany.

Its main exports are minerals like tungsten,tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt. It is the second largest producer of salt after the US. It is also one of the largest producers of aluminum.

Of particular importance is China's production and export control of rare earth elements. Rare earths are vital in the production of high tech goods from solar panels, next generation battery system and certain electronic systems.

One of the key causes of inflation is the monetary supply. In the case of China, the heavy handed curbs on credit expansion have created a host of grey-market institutions and in some cases black market operations.

Some analyst suggest that only half of total credit financing comes from the heavily regulated banks that loans money mainly to state controlled or affiliated firms. This suggest that up to half of all financing is coming from a range of trust & finance companies, leasing companies and underground banks in one obscure form or another, all of which is less or not regulated at all.

If ignored long enough the growing influence of these "shadow banks" have the potential to undermine the China government's control over its huge financial system. This also probably explains why the asset markets, stock markets, and food prices is still edging up in spite of cooling measures on official bank loans and the overall markets by the China authorities.

With a "shadow" interest rates of up to 10 percent and more, this underground web of private funds may well be what is creating China's real estate and other asset bubbles.

One of the most often used tools used by governments to control inflation is the country's currency exchange rates.

For the past decade since around 2000, China's export driven boom have been partly driven by an artificially limited low rate. Since late 2009 to early 2010, China's central government have come under pressure mainly from the the US, and have gradually allowed the Yuan (or Ren Min Bi, RMB) to gradually appreciate against the US dollar.

The appreciation of the RMB is one of the most immediate ways that China's government can limit the pace of inflation which is probably one of the most important reason that it is doing it.

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The Causes of China Inflation and Its Effects

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This page will focus on the causes and effects of inflation on China. China is fast becoming a key economic power. This makes understanding the country's future inflation rate trends all the more important. Please go ahead and learn more from the list of historical and current inflation rates, facts and news articles.

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China's inflation rate

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Article: What's going on with China's Economy?

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Article: What's going on with China's Economy?

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China's stock market experienced a free fall in the first week of trading this year. China made a huge mistake by installing circuit breakers. A circuit breaker shuts down the trading day when the market is down by a certain percentage. It also incites panic in the marginal investors because they become uninformed of the market when circuit breakers are used. An investor will only panic when China installs a circuit breaker in fear of a market crash.

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What's Going On With China's Stock Markets And Economy?

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Much credit for the historic, some say hysteric, early 2016 drop in US stock market valuations has been given to concerns about what is going on in China. Here is an insider's view that shines a light on the issues and makes reality much easier to see.

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In the first quarter of the year 2016, China's economy is going down and this is bad due to many countries working with China. Thankfully as of now, China is not at risk but needs to be closely monitored because if China were to really be involved in a recession. This leads Asia's entire financial edifice to potential danger and give rise to a plethora of unnecessary problems that may arise.

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Imports were also disappointing, sliding by 10.9pc in April compared with the same period a year ago. Analysts had expected a fall of less than half that size. The larger slide in imports meant China's trade surplus - the gap between imports and exports - widened to £45.56bn (£31.57bn) last month.

Zhou Hao, a Commerzbank economist, said: "Both exports and imports came in weaker than expected, in line with the soft trade performance across Asia, pointing to another challenging year for emerging markets."

China's year-on-year economic growth dropped to 6.7pc in the first quarter, averting fears of a more brutal slowdown. However, concerns over a damaging "hard landing" linger.

Financial markets will have to prepare themselves for further disappointments in Chinese economic data, Mr Zhou warned, adding that "some sort of market correction might be inevitable".

Christian Keller, a Barclays economist, said that there had been a return in global confidence since the beginning of the year, when fears over China came to the fore. "A combination of improving activity in China and an apparent détente in favour of a weaker dollar among core central banks" had helped the situation, he said.

"For now, this comfort around China does not seem to be a risk." However, Mr Keller highlighted recent survey data as a sign that the world's second largest economy could slow again. He added: "We expect China's growth to slow again in the second half and we note that aggressive credit expansion may have further increased underlying financial vulnerabilities."

Separate data are expected to show that Chinese inflation rose to its highest levels since 2013 in the year to April, as elevated pork prices bump up the overall inflation basket.

The figures, due to be released on Tuesday, are set to show that inflation picked up to 2.4pc last month, from 2.3pc, analysts said.

Chang Liu, of Capital Economics, said that more expensive pig meat "may trigger concerns about a re-run of the pork-powered surges in inflation that caused macro worries in 2007 and 2011". However, Mr Liu said that he did not expect inflation to rise much further this year.

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Chinese trade slump as Asian economic slowdown hits

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Imports were also disappointing, sliding by 10.9pc in April compared with the same period a year ago. Analysts had expected a fall of less than half that size. The larger slide in imports meant China's trade surplus - the gap between imports and exports - widened to £45.56bn (£31.57bn) last month.

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What is China's economic growth rate for fiscal year 2015? Is it going into a recession? 

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What is China's economic growth rate for fiscal year 2015? Is it going into a recession? 

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(PIC)

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World Bank expects China GDP growth to slow from 7.6pc to 7.5 in 2015
CHINA's growth will moderate over the medium term as the economy continues to rebalance gradually, according to a World Bank study.

Growth is expected to slow to 7.6 per cent in 2014, and 7.5 per cent in 2015, from 7.7 per cent in 2013, according to the World Bank's China Economic Update.

"The rebalancing will be uneven, reflecting tensions between structural trends and near term demand management measures," said chief China economist Chorching Goh.

The slowdown in the first quarter reflected a combination of dissipating effects of earlier measures to support growth, a weak external environment, and tighter credit, especially for real estate, said the report. But economic activity, including industrial production, has picked up in recent weeks. The recent acceleration reflects robust consumption and a recovery of external demand. This growth is expected to continue into the next two quarters, supported by infrastructure investments and tax incentives for small- and medium-sized enterprises, said the World Bank. Of concern, however, is a "disorderly deleveraging of local government debt" that could trigger a sharp slowdown in investment growth. "Second, an abrupt change in the cost of, or access to, capital for such sectors as real estate could significantly reduce economic activity. Finally, the recovery in exports may not materialise if growth in advanced countries weakens," said the report.

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World Bank expects China GDP growth to slow from 7.6pc to 7.5 in 2015

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World Bank expects China GDP growth to slow from 7.6pc to 7.5 in 2015 CHINA's growth will moderate over the medium term as the economy continues to rebalance gradually, according to a World Bank study.

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1. Knoema, (2016), World GDP Ranking 2015 | Data and Charts , Retrieved 14 May 2016 from,https://knoema.com/nwnfkne/world-gdp-ranking-2015-data-and-charts
2. http://www.tradingeconomics.com/china/inflation-cpi