Busines Blog: Survey of China's PMI Growth

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http://www.businessweek.com/ap/financialnews/D9B21QEG1.html

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The following article reports on the recent survey of the purchasing managers index in China’s economy and its economy growth. The state-sanctioned China Federation of Logistics and Purchasing had surveyed approximately 700 different company managers that monitor their purchasing. Based on their results, a 7 straight month growth of PMI was recorded to 54.3, a slight growth from the 50 from last month in a 100-point scale. Additionally, the economic growth had also shown a growth from 6.1 to 7.9 after a season, due to the government’s stimulus of 4 trillion yuan. At the same time, the article reports on an overcapacity warning on few industries from China, and some investments invested to different industries to clear a few economic risks.

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External Environment: political opportunities and threats (1.5)
Stakeholders: External Stakeholders: role of government (1.4)
Public Sector (1.2)

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The article focuses on the role of how the government has actively influenced its economy by several methods. First of all, after the huge financial crisis last year, the economic growth has decline to below eight, so the government of Beijing decided to precede a huge stimulus. The government had then driven back the economy with a enormous stimulus of 4 trillion yuan to its economy for future infra-structure and investment projects. If the government hadn’t stimulated the economy, China would be suffering from a downturn of growth and more economic issues will arise as the PMI and GDP declines. On the other hand, another example a government influence was the investment from the government to several raw material industries to resolve economy and overcapacity issues.

I think that the China government has been playing a huge role in controlling and overseeing the economy, which leads in affecting its index like the GDP and PMI positively. The control of China’s economy is needed from its government. Because China is growing in such a rapid speed with billions of people beginning to have a higher GDP and PMI, it is necessary for the government to make sure that the economy is doing well. This method of China will have a benefit of a constant monitoring of the economy. For example, the government can prevent any other investors or companies affecting the stock market and the economy. Additionally, with the government having such a huge backup of assets and cash-flow, when China is facing economic issues, the government can assist its own economy.

On the other hand, this kind of monitoring has its negatives since the economy is so dependent on the government, the economy would be easily sensitive to any political issues and factors. In addition, though the economy is growing in a decent speed, it has its limitations for businesses and firms since the government can easily control any decision in the economy.