In the last week, the revaluation of RMB has captured the headlines of most big newspaper and magazines. There are various comments on the effects and consequence of the announcement made by PBOC. Some sector got excited by seeing the possibility that China’s consumption sector might be activated through the RMB appreciation.

CHINATELLS doesn’t want to repeat what has been said by most media. What CHINATELLS would like o discuss here, is a more long term and fundamental change in China’s growth model. It is CHINATELLS’ view that China’s GDP is likely to grow at a significantly lower rate in the next 10 years. However it is not necessarily a bad thing for Chinese economy, and the world economy.

The Chinese government has learned a lot through the financial crisis started in 2008. One of the lessons seems to be that China will face more and more pressure from international community regarding its economic growth model (manufacturing + export) and currency (RMB peg to USD). Given the gloomy outlook of world economy in the foreseeable future, such pressure from international peers will only intensify. Therefore China will face a lot of obstacles if the country wants to continue to develop its economy through the existing model, Read the rest of this entry »