Europe talks already about a triple-dip, a third financial crisis, as China´s premier Li Keqiang visited the continent with a global anti-recession business trip, offering deals to Germany, Italy and Russia. Financial analyst Sara Hsu. “Bolstering growth is needed in those countries… It won´t be Li´s last tour,” writes financial analyst Sara Hsu in the Diplomat.
Li’s tour highlights the major challenges facing these countries. While Germany remains economically strong, as a producer and exporter of high-value added products, China, Italy and Russia must overcome structural barriers to economic growth. China, for its part, currently faces a large debt burden incurred mainly by its corporate sector and local governments. At the same time, the nation is attempting to move away from a low value-added manufacturing model of growth to a high value-added manufacturing and service-based economy. Italy faces major challenges pulling out of its debt distress, with the most difficult issue its underlying need for economic restructuring. Finally, Russia faces not only economic sanctions, but serious challenges to the expansion of its market economy. Institutions favoring rent-oriented firms have stalled the growth of the private economy, with a lack of competition, corruption, and inefficiency posing barriers to market expansion.
It is hopeful that the agreements resulting from Li’s tour will bolster growth in these countries. The agreements work in part to facilitate restructuring, focusing to some extent on economic upgrading and innovation, as between China and Germany and China and Russia, the building of infrastructure to complement industry growth, as between China and Russia, and investment, as between China and all three nations. The lion’s share of the restructuring onus still falls on the shoulders of each nation, however, and the difficulty of the task may mean that Li’s Recession Tour won’t be his last.
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