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China And The Global Economy
Today, China is experiencing a sharp slowdown in Hong Kong, Xinjiang and elsewhere. In fact, its economy has grown rapidly over the past decade, making it an indispensable trading partner for almost every country in the world. At the same time, China has increased its share of the global economy and will soon overtake the United States as the world’s largest economic power. We look at China’s annual growth rate and its share of the global economy based on GDP over the past ten years.
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Hard numbers: World prepares to vote, Myanmar rebels advance, Uganda captures terrorist chief, Israeli cabinet in disarray over West Bank taxes, jury convicts SBF. The hard numbers of Asia and the Pacific are relatively bright spots in the darkest context of the global economy. difficult recovery.
According to the weekly chart, the region will account for about 70 percent of global growth this year, a much higher share than in recent years.
Our latest regional economic outlook illustrates the resilience of the world’s most dynamic regions and the key challenges facing policymakers. Growth in the Asia-Pacific region is expected to increase to 4.6% this year, from 3.8% last year.
A key development is the opening of China, where increased consumption is driving growth across the region despite weaker demand from the rest of the world. Risks to the outlook include the impact of U.S. monetary policy. tighter than expected supply chain disruptions associated with geoeconomic fragmentation.
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But the region also faces significant challenges. In the short term, monetary and fiscal policy must remain tight to bring inflation back to the central bank’s objectives in a sustainable manner and stabilize public debt. Managing global shocks requires an integrated policy response using all available instruments. Although Asian financial systems have not been significantly affected by the recent banking turmoil in the United States and Europe, they should be closely monitored given the high levels of household and corporate debt.
In the long term, China’s economy, which has been the main driver of regional and global growth for decades, is expected to slow significantly amid unfavorable demographics and falling productivity. The region should prioritize structural reforms aimed at fostering long-term growth, particularly through innovation and digitalisation, while accelerating the transition to green energy.
The negative effects of major economic “derisking” strategies will be felt outside of China, while comprehensive reforms in China could have significant positive effects.
Special drawing rights provide a significant boost to countries in need, but more support is encouraged to strengthen our unique lending tools. Just eight months ago, China’s economy was expected to recover. Zero-covid has been abandoned; domestic buyers and tourists are allowed to move freely. However, the rebound has been modest and the result has been weak growth and deflation. This will not only affect the population. What happens in the world’s second largest economy has significance beyond its borders.
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Because China is so large, its changing economic conditions can contribute to the overall global growth rate. But China’s slowdown also directly affects the prospects of other countries. Households and their businesses will buy fewer goods and services than otherwise, which affects both the producers of those goods and their other consumers. China’s difficulties will be a source of suffering in some quarters. However, in others they will provide relief.
Commodity exporters are especially vulnerable to China’s slowdown. The country consumes nearly one-fifth of the world’s oil, half of its refined copper, nickel and zinc, and more than three-fifths of its iron ore. China’s real estate woes mean it will need fewer of these shares. It would be a blow to countries like Zambia, where exports of copper and other metals to China account for 20% of GDP, and Australia, a major supplier of coal and iron. On August 22, the boss of BHP, the world’s largest mining company, announced the Australian company’s lowest annual profit in three years and warned that China’s recovery efforts were making no difference on the ground.
Germany is one of the weak points of the West. Falling Chinese demand is one of the reasons why the country’s economy has contracted or stagnated over the past three quarters. And some Western companies risk relying on China for revenue. In 2021, the 200 largest multinational companies from America, Europe and Japan make 13% of sales in this country, earning $700 billion. Tesla remains more exposed, accounting for about a fifth of its sales in China; Chipmaker Qualcomm accounts for two-thirds.
If the slowdown does not turn into a major crisis, suffering will remain relatively concentrated. Sales to China represent only 4-8% of all listed companies in America, Europe and Japan. Exports from America, Great Britain, France and Spain represent 1 to 2% of production respectively. Even Germany, which accounts for nearly 4% of its exports, would have to collapse for China to deal a major blow to its economy.
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Moreover, China’s difficulties come at a time when the rest of the world is doing better than expected. In July, the IMF revised its global growth forecast upwards from its April forecast. Most notable is the poor health of America, the world’s largest importer and geopolitical rival China, which some surveys show is growing at a staggering rate of nearly 6 percent.
In this context, the slowdown in China’s growth is even expected to bring some relief to global consumers, as it will translate into lower demand for goods, leading to lower prices and import costs. This in turn will facilitate the work of the Federal Reserve and other central banks. Many have raised rates to their highest level in decades and are loathe to go any further.
But what happens if something goes wrong in China? In a worst-case scenario, a real estate collapse could hit global financial markets. A Bank of England study published in 2018 found that a “hard landing” in China, where economic growth fell from 7% to -1%, would cause global asset prices to fall and currencies to rise. the world got rich as investors rushed in. towards safer assets. Overall, British GDP will decrease by 1.2%. While most Western financial institutions have little exposure to China, there are exceptions, such as HSBC and Standard Chartered, two British banks.
A longer recession could force China to turn inward, reducing foreign investment and borrowing. After becoming the world’s largest bilateral creditor in 2017, it has already slumped as projects go awry. Managers may become more anxious if they are fighting a fire in their home. Observers will witness the coming tenth anniversary of the Belt and Road Initiative, where China has flocked to Mozambique bridges and Pakistani ports for official signals of intent.
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Real domestic difficulties will also change the way the world views China. Rapid growth coupled with large foreign loans have boosted the country’s reputation. According to a recent survey conducted by the Pew polling institute in around twenty countries, densely populated areas generally have an unfavorable view of China. In most developing countries, the situation is different: Mexicans, Kenyans, Nigerians and South Africans view China in a more favorable light and welcome Chinese investment. The question is whether this will still be the case a year from now. ■
For expert analysis of the biggest news in economics, finance and markets, sign up for Money Talks, our weekly subscription-only newsletter. The global spread of the coronavirus has affected consumers around the world, reducing demand for products made primarily in China. It is expected that as global demand for Chinese products declines, the country’s main economic component – manufacturing – will decline, thus hindering the country’s economic development.
Based on 2019 data, the top five economies by GDP are the United States, China, Japan, Germany and India. These five countries alone represent 55% of the total global GDP of $86.31 trillion. China accounts for about 16.3% of global GDP.
China is known as the “factory of the world”, producing a wide variety of products from shoes and socks to hammers and computers. The country’s large manufacturing base allows it to export large quantities of goods around the world, meeting the demands of almost every consumer in the world.
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China has grown rapidly in recent decades, growing from a GDP of $305 billion in 1980 to more than $14 trillion last year, making it the second largest economy after the United States. . THE
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