Eurasian Integration Yearbook 2012

Elvira Kurmanalieva, Konstantin Fedorov. “The Impact of GlobalFinancial and Economic Instability on the CIS”The Economics of the Post-Sovietand Eurasian Integrationc. Slowdown in economic growth and decrease in real property pricesin ChinaThe Chinese economy, whose renewed growth with the help of governmentincentives in 2009-2010 had significantly facilitated the recovery from thecrisis for both China and the rest of the world, has again slowed down. This ispartially due to a change in state policy in 2011: having faced overheating inthe economy, which manifested itself in accelerating inflation and, in particular,a quick rise in real property prices, the authorities took measures to restrainthe credit expansion, which have already brought results. As a result of this,inflation went down and the real property boom is fading out. In addition,the slowdown in China’s economic growth has been caused by a number2520151050-5-10Figure 7.2.Land prices andreal propertyrentals in China(12-monthdynamics)Source: CEICdatabaseMarch, 1998January, 1999November, 1999September , 2000July, 2001May, 2002March, 2003January, 2004November, 2004September , 2005July, 2006May, 2007March, 2008January, 2009November, 2009September , 2010Land pricesReal property rentalsof longer-term factors: the demand for Chinese exports is falling because ofdifficulties in Western economies, while increasing prices and wages in thecountry make them less competitive. At present, China’s monetary policy isbeing weakened to a certain extent since the previous year’s tightening madeit achieve its objectives at large. If the Chinese economy avoids disruptivedevelopments, in particular in the financial sector (which was accumulatingconsiderable volumes of bad debts during the previous credit expansion), Chinacould even become a source of positive effects for the global economy. Thefact that the authorities still possess very significant financial reserves makesthis rather probable; however one should not rule out the possibility that thesituation will change unfavourably. The financial crisis in China, as well as thehasty financial consolidation in the US, which we discussed above, can becaused by unfavourable events outside the country, for example in Europe.Eurasian Development Bank121