Case Study

Read the following test carefully & answer Questions No. 12 & 13, given below:

Chinese Economy Risks Deeper Slowdown than Markets Realise-( Bloomberg, 24th October 2021)            

China’s Economy risks slowdowns faster than global investors realize. It is pushing to cut its dependence on real estate. It has started regulating sectors from education to technology, as it is facing power shortages & the pandemic.

Many economists have warned that the GDP growth rate will fall to 8.2% this year & to below 5% in the next year.

China is now planning to stabilize debt growth, curb inequality & channel resources into hi-tech manufacturing. Data released last week already showed a sharp slowdown in third-quarter GDP growth to 4.9% from 7.9% in the previous quarter. There is more pain likely to come as the electricity shortage persists, while new COVID-19 infections are expected to rise in the coming days.  

Even before the pandemic hit, China was surprising economists with a slower-than-expected growth rate caused by the easing off debt risks. China’s Premier Li Keqiang announced in March a growth target of ” above 6% in the coming financial year.”

China has signaled, in recent weeks that it could loosen some policies like telling banks to pick up the pace of mortgage lending as a short-term stimulus. Governor of the People’s Bank of China Yi Gang, recently said he sees an expansion of about 8% for this year.   

China’s slowdown comes as the global recovery from COVID-19 risks loses momentum. Among those at risk from falling investments in China are commodity exporters like Australia, South Africa, Chile, Peru & Brazil. Slower trades could also hit countries like Malaysia, Singapore & Thailand.

The other risk is that China’s policymakers may struggle to flick the switch back to the growth model if they feel that’s needed. Economists noted that the electricity shortages that are crimping industrial production will make it harder to cushion growth by boosting investment in infrastructure. That kind of policy could only work next year once the power crunch eases.

Question 12: State & discuss any two reasons that exhibit a slowdown in the Chinese economy. (3 marks)

Answer:

Some important reasons for slowdown in the Chinese economy are as followers:

• Base Effect: China was in a better position about reviving economic growth post Covid-19 pandemic. This resulted in a situation where, the reference point was the higher levels of growth rate in the quater passed, resulting in a lower growth rate.China is going through a ‘mature’ stage of economic development i.e. an economy that has witnessed double-digit growth for two decades is bound to face a slowdown.
• Fuel/Power Crisis: A surge in coal prices & a resultant electricity shortage prompted provincial governments to cut power supplies. This fuel/power crisis in China continues to affect factories & units across the country’s industrial heartland in its southeast that have had to curtail output.

Question 13: Discuss briefly any two measures, which you may suggest as an economic advisor to the government of China. (3 marks)

Answer:

The measures which can be suggested as an economic advisor to the government of China are listed below:

1. Suggesting for pace up of mortgage lending as a short-term stimulus for the banks.
2. Reduction in the dependence on real estate and regulate sectors from education to technology in a more planned manner.

CBSE Previous Years’ Question Paper for the subject of Economics is an essential learning source for the preparation of Class 12 Board Examinations. Students can refer to the pattern of below question paper, for understanding the question paper pattern. The previous years’ question papers can be collected and practiced by the students during the revision. Certain key concepts related to the question paper patterns and marking schemes are cleared by the question paper.

With the help of CBSE Previous Years’ Question Paper for Economics, students will understand if they are prepared for the examination completely or not and will be able to examine their knowledge about the subject and gain more confidence in answering the question paper. If any mistake is made while formulating the answers, they can concentrate more on such types of questions; so that mistakes can be reduced in the final examinations.