China’s Economy and Global Economic Crisis Toll

China Economy and the World

First Published Date : December 29, 2011

The world’s number two economy is very important to the world. The global economic crisis is taking a toll on China’s economy and economic growth of China is likely to slow down according to various forecasts.

China’s economic growth has been fairly stable and good for quite a few years. However, it has slowed for the last three quarters and it is expected to dip below 9 percent in 2012, for the first time since 2001. According to IMF, if the global economic situation does not worsen, it is reasonable to expect that China’s growth will be at 9 percent. According to a study released by senior Chinese government researchers, economic growth should be 7 to 8 percent in 2012. Asia-based investment bank Nomura International predicts economic growth is likely to slip to 7.9 percent. The last time China’s economic growth dropped this low was in 1998 during the Asia-Pacific financial crisis.

Inflation, the housing bubble, export markets, and appreciating Yuan seems be the major factors behind the declining economic growth. China has seen its inflation falling from 6.5 percent in July to 4.2 percent in November. A lower demand on the housing market will impact other related industries as well. The export sector seems to be the one with the biggest decline and the greatest risk. China’s 20 percent exports go to the European Union and if the economic and debt crisis continue to persist, the impact will be enormous on China. Also, an appreciating Yuan will make export markets more likely to perform at their best.

Although the Chinese government has pledged growth in 2012, its economy is shifting from double-digit, high-speed growth to single-digit growth. It is widely expected that China’s central bank will loosen its monetary policy to support the banking industry, boost domestic demand, and increase economic growth.

The biggest challenge the Chinese regime will face in light of the economic slowdown is how the general Chinese population will react. Will there be any strikes, protests, or uprisings or will everything be calm, quiet, and manageable for the regime as it has been for a while?