There is Uncertainty in the Chinese Economy

China is the manufacturing monster of the 21st Century. Unlike any other economy in the world it has been reaching its production goals consistently and on time. The economic growth is so strong that many wonder precisely who will be the world's next economic super power. China does face some risks that could make its growing dynasty crash. These risks include inflation, labor costs and a weak central bank.

Economic Overview:

China currently has export surpluses around $275 billion dollars annually. Most of their surplus is due to the manufacturing of cheaper products. Much of China is engaged in the manufacturing industry and other countries are having difficulty competing against their low priced labor, high tech manufacturing equipment and strict economic policies.

China has done so well in the last decade that they have national reserves around 1.3 trillion dollars. China's economy is the fourth largest in the world and it is likely that they could supersede the U.S. within ten years or less. In other words they will become the world's #1 superpower.

The economic policy that China uses national is to artificially keep currency low so that their exports are still cheaper than everyone else in the world. Their Central Bank is considered relatively weak when compared to regional powers and unable to avert crisis if it should happen. China's economy is closed to foreign investors even though its stock market is growing by leaps and bounds.

The Risks:

The Chinese economy is at risk of instability and overheating. Inflation doesn't seem to be of a major concern but when the economy keeps soaring forward there is always a risk that inflation will raise. In the case of China the government is artificially keeping its currently low so that it can continue to keep its products low and export. Eventually the market forces are going to break through these government controls and force the economy into a recession.

China also faces risks from the United States. Since the U.S. is growing at a slower rate and there is some likelihood that the value of the U.S. dollar will continue a slow trend downward Americans will find that exports may become more expensive. If the political and economic backlash against China continues it could narrow the trade gap. If China isn't doing as much business with its greatest customer it could dampen their economy.

Rising wages are also becoming a problem for Chinese manufacturers. Over the past few years Chinese wages have gone up as much as 40% in some sectors. One of the reasons these wages have gone up is because just about everyone is employed in many of the provinces. There is lots of competition between manufacturers and turn over rates in many industries is high. The higher the wages the more likely the cost of doing business will rise.