Effect of 2008 crisis on china
Chinese economy has emerged as a major player in the world economy. Chinese economy’s high GDP growth has changed the distribution of economic activities across the world. It passed Japan to become the second largest economy, and it is only a matter of time before it passes the United States. Chinese exports have lessened consumer prices around the globe, and its imports have begun to have a major impact on global commodity prices. China has become a major in intra-industry trade. From this point of view, China may become one of the engine of the world economy.
What is of most importance is to know how China responded to the global economy, especially the global financial crisis and with concerns regarding US recession. The report provides a brief review of China’s economic position in the world economy, discusses the spillover effects of the global financial crisis on China’s financial markets and the real economy, and analyzes the reasons for the limited impact of the global crisis on China. One interesting result is that while China was not one of the countries strongest hit by the crisis, neither was it as insulated as is assumed. Although its high growth rate during the crisis was the envy of most of the other countries, Chinese growth was substantially lessened by the crisis, suggesting that the decoupling of Chinese growth from the advanced countries may not be as great as many popular analyses have suggested. This report also talks of the major challenges facing China for a sustainable growth.
Spillover Effects of the Global Financial Crisis on China’s Economy
The subprime financial crisis of the US released a series of serious effects from the stock market collapsing, financial institutions failing, and economies being pushed in recession. This crisis spread from real estate to other sectors of economy and across the globe leads to the global financial crisis. Since, China was able to maintain relatively high economic growth, the negative effects from the global financial crisis on China were considerably stronger than is often realized. This misconception arose largely because China continued to have one of the highest rates of economic growth all across the globe, recording 9.6% in 2008 and 9.2% in 2009 (Table 1). What is missed here is that, while most countries would be delighted to have such growth, these rates reflected a substantial drop from the 14.2% growth in 2007. In terms of the falls in growth rate during the crisis period, China was hit as hard as many of the advanced economies.