Mecklai: China - End of days or just another 'Bump'?

Mecklai Graph of the day: China - End of days or just another 'Bump'?

‘Euro zone debt crisis’ has affected world economy and China is not an exception to this. The life saving drug for emerging economy, Foreign Capital inflows; are at its low. Ironically, the world largest manufacturer is struggling to attract investors. Falling industrial output & rising costs on account of limited availability of cheap labor is hurting the economy from all the side. As it can be seen in the graph, the FDI inflows have not only dried up but it has entered into the negative territory indicating that investors are moving their capital away from China ahead of the rising cost & its murkier growth picture. February 2012 was a point, which triggered the capital outflows. The figure may seem small for February & March but one must compare it against the high inflows. The central bank declared a rate cut last week to woo the investor. Yet, the investors are not looking confident about whether China will be able to grow at the pace similar to that of last decade. However, FDI is not the only factor on which the economy depends. The government is currently taking steps to move from manufacturing growth to a growth led by domestic consumption. Rural and urban wage rates have been rising at an ever-increasing pace, which is likely to boost domestic demand. It is not appropriate to say that it is ‘End of Days’ for China but we can’t deny that it’s a bump in the road & accelerating from here does not look very easy. It’s always difficult for a $ 7 trillion economy to grow at double-digit pace and hence the growth rate of near 7% to 8% seems to be the new normal that needs to be accepted.                             Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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