Can China continue its economic growth? Chinese President Xi Jinping supposedly has the answer. He states that China’s economy is capable of creating 10 million jobs throughout the country this year and more than 50 million before 2020. This increase in employment would allow China to continue to expand its gross domestic product by 6.5% per year in order to accomplish China’s goal of doubling its economy of 2010 by 2020.
Many economists in China, and around the world, fear that the increase in debt needed to support that level of growth might stimulate China’s economy but at the cost of small businesses. Government-owned businesses in China have significant advantages over, and are more reliable than, private businesses. However, some public sector jobs at mines and steel mills are in danger of being cut. Premier Li Keqiang was not definitive about how many individuals the government would lay off, but assures that it will provide as much as $15.3 billion in support funds for these workers.
The central bank of China has outlined several reforms that it must undertake to continue to keep the economy growing. Chinese economists and political observers believe many of these reforms will never be actually implemented; nonetheless, China will begin to institute a tax on banks. One tax in particular is a 6% tax on the interest that a bank collects on loans.
China cannot afford to see a dip in economic growth or a decrease in exports. If China continues to be forced to cut into its foreign exchange reserves - which have already fallen by as much as a third during the past three months - then production will stagnate and foreign investment will fall. Many foreign investors are already wary of Chinese monetary policies and the country’s ability to set its own currency value. Foreign investors will continue to seek other countries in which to invest until they believe that China can produce the same type of growth that it has in the past.