23-12-2024 11:50
China's economy has every chance to overcome current crisis
China's economy is experiencing a rough time! Crisis waves hit it now and then. According to the Wall Street Journal (WSJ), China's economy is currently struggling with overcapacity and a vicious cycle of problems.
American analysts say that with oversupply and falling demand, Chinese manufacturers are forced to cut prices and reduce investments. Penelope Prime, founder of the China Research Center, explained that in such a situation, buyers hold off on purchases, expecting prices to drop even more. Prime noted that this creates the so-called vicious cycle of issues.
For example, analysts highlighted Shandong Chenming Paper, one of the largest paper producers in the region. Recently, the company lowered its product prices to clear out warehouses. However, this led to increased losses. As a result, the firm had to shut down three-quarters of its production capacity. Now, the management is working to resolve the ongoing issues.
WSJ believes that when people expect low prices, it is hard to change the situation. A similar situation happened in Japan in the 1900s, during a real estate and stock market crisis. The Japanese shifted focus to paying off debts, leading to sluggish economic growth for the next 30 years.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
Published 23 December 2024
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