China's Economic Slowdown: All you need to know

Business - Akanksha Singh - Nov 10,2016

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china economic meltdown might be a curse to the world economy

Chinese economy is at it’s lowest ever, economists suggest an impending threat to the world economy

China has been reporting a constant GDP of 6.7 % since the past three fiscal years, but the stastics tell a very different story. The country’s GDP is set to reach its lowest, which hasn’t happened in the past 25 years.

One wonders how China side stepped the recession of 2008-09 completely, with minimal loss and why is it in such deep now?

The answer to that is debt. China has been piling on credit at a wondrous pace; its debt counts to a humongous 300% of the overall GDP.

China, well known as the “currency manipulator”, has been de-evaluating its currency to increase the export outflow; but this de-evaluation and capital outflow backfired into an economic stand-still. China’s economy is on the verge of a meltdown, which is surely an alarming situation. Economists suggest that China has built for itself, something alike the recession of 2008, and the economy would suffer heavily on its hand.

Without a growth in Chinese economy, the world would be in recession. Chinese GDP target of 6.7% translates to a 1.2% of the world growth, without it, the IMF’s estimated 3.1% of the world GDP would be brought down to a 1.9%; far below the 2.5% threshold of recession.

Big economies such as Australia, Brazil, Russia, New Zealand and Canada would be hit pretty hard, all suggestively dependent on the Chinese commodity demand. These economies alone provide for 9% of the world GDP; no wonder in assuming what would happen when they face losses because of the Chinese implosion.

The same follows for China’s Asian trading pals, most of which still are economies dependent on export, connected to China’s large markets. The fishnet of economies not only involves small Asian developing countries but also well-established economies like Korea and Japan.

Interestingly this also includes United States; China being USA’s third largest, and rapidly growing market. The same case applies for Germany. Germany’s economic growth majorly depends upon exports and China is Germany’s third largest market as well.

So along with Asia, United States, and the Germany led Europe, China would bring down the world and impose a state of hard and heavy recession to follow in its wake.