...How China's Black Monday could affect global economies By Ravender Sembhy August 24, 2015 14:11 BST After the Chinese stock market suffered its biggest one day loss since 2007, plummeting 8.5%, the country's media have dubbed today "Black Monday". The ripple effect has been felt across the globe, with indices nosediving one after the other. The FTSE 100 fell below the 6,000 mark for the first time since 2013, and Japan's Nikkei, the German DAX and France's CAC all followed suit in recording heavy losses. The Shanghai Composite lost gains made in 2015, plunging 8.5%. Why is this happening? Slowing growth in the world's second largest economy has been spooking investors since the beginning of the year, which has contributed to the loss. China is targeting growth of 7% in 2015, down from 7.4% in 2014, as the country attempts to move from an export-led economy to one more focused on consumer spending. However, there are now worries it will fail to hit forecasts and economic data come in weaker. Earlier in 2015, investors signalled their concern about the slowdown by embarking on a selling frenzy that wiped out more than 30% – some $3tn (£1.9tn, €2.7tn) – of China's equity market value in one month. The Chinese government has responded by injecting billions into blue chip stocks, permitting its state pension fund to invest in domestic shares for the first time and by devaluing its currency in a bid to boost exports. But none of these actions appears to have had the desired...
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...the establishment of a single global economy. China is current the world’s second largest economy and in the past two decades has been the worlds fastest growing economy, sustaining an average rate of growth in real GDP of 10% per annum. The effect of globalisation on China’s economy can be seen in the areas of economic growth, economic development, quality of life, economic stability and environmental sustainability. Economic growth refers to the increase in a country’s GDP over a period of time. The influence of globalisation on China has been profound with economic growth being sustained between 8 and 10 percent in the past 2 decades. This is due to China moving away from being an ecnomy with a domestic focus to a trade oriented economy, highly integreated with the global economy to take advantage of globalisation. This increased integration has seen China’s share of world exports in goods and services rise to 9.4%, and its share of world GDP estimated at 14.3%. The effect of this increased integration is evident as China is now the worlds second largest economy in the world measured by the nominal value of GDP in US dollars. Economic development can be measured through growth in GDP per capita as well as other qualitative measures. China’s rapid rate of economic growth has been based on its export oriented strategies financed by foreign investment which has increased substantially as a result of China’s involvement with the global economy. This has resulted in a rise of...
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...exporters and is attracting record amounts of foreign investment. In turn, they are investing billions of dollars abroad. The collapse in international export markets that accompanied the global financial crisis of 2009 initially hit China hard. But they stand strong their economy and quickly returning to growth. In 2011, China formally overtook Japan to become the world's second-largest economy. Todays, the connection between China's economy and global economy is becoming tighter. In addition, more foreigners have expressed their admirations on China's economic achievements. They generally believe that the global economic development cannot go without China. The healthy and steady economic development of China is a huge contribution to the world. As the globalization is accelerating, the mutual dependence between China's economy and global economy has also strengthened. China is developing its transformation of economic growth mode and its economic structural adjustment. China's economic development is also becoming steadier and injecting new energy into the regional and global economy. The negative impact caused by the international financial crisis still has not completely solved but China's steady economic development gives the world's confidence on the early recovery of the global economy. China is categories as the fastest growing country in East Asia. Between the year of 1979 and 2001, Chinese real GDP grew from $177 billion to $1.16 trillion regarding to 2001 prices...
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...impacts of China’s slowing growth rates on the global environment. The issue is that the Chinese economy has become a significant world player and “the evolution” of its business cycle will have severe knock-on effects on the rest of the world economy, particularly in Australia. The article highlights the economic implications of China’s slowing growth rates as Australia’s most important trading partner; for example Boyd reports that China’s imminent economic performance “will have a direct bearing on the Australian dollar” which is a “proxy for investment in developing Asia”. Boyd also argues that “Australia is at stake...if China’s economy stumbles” because China is a major investor in Australian resources and infrastructure. Boyd emphasises that due to Chinese demand for Australian commodities, a downturn in the US economy no longer has an immediate impact on the Australian economy. Further, of global lending, Boyd says that “banks are still pumping money into China” because they are heavily relying on the “Chinese miracle economy” to grow for some time. The article reports that high-inflation and a decrease in money supply are causing the Chinese economy to contract. As China is a globalising economy, these contractionary factors have implications not only for China, but for global economies. The reported downturn of China’s economy relates to aspects of CISS2001. This particular case demonstrates that a nation’s transformation from a centralised, closed economy into an open...
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...to everyone that China has a major role in the global economy since its economic growth has moves the country into the ranks of middle income countries. Unfortunately, issues that China faced in most recently are whether it can contribute to the vigour of the worldwide economy and manage its internal stability. China's economy is now weakening and its GDP is perhaps below the government target of 7%. Investment sentiment is the weakest indicator, while the production level in China's industries has dropped which left surplus production capacity in the industries. Although China growth is slowing down, the probability that it will collapse suddenly is small. 2.0 Discussion The biggest problem in China is that the massive debt explosion is now threatening its entire economy, leading to a reduction in capital investment. There has been a boom in the Chinese stock market, yet buying share with borrowed money had magnified the fall when companies with huge debt begin to sell their investments to pay debts (Walker, 2015). Shanghai Composite Index decreased about 8.5% in August followed by China economy downturn which perhaps was the biggest decrease since 2007 (McHugh, 2015). Overreaction in Chinese market then affect the world such as Japan's Nikkei index had slipped by 4.6%, while the Eurofirst 300 index has had its worst day since 2009 (Matthews, 2015). However, falling of stock markets in itself will not cumber the global economy down. Allen (2015) reported that, individual whose...
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...FIN501: FINANCIAL MANAGEMENT The Research Project CHINA’S DEVALUATION OF YUAN SLAMS U.S STOCKS 201505021 TRAN THI THANH BINH (SARA) SolBridge International School of Business Winter 2015 China's Devaluation of Yuan Slams U.S. Stocks (Aug 11 2015, 1:21 pm ET) NEW YORK -- China's 2 percent devaluation of the yuan on Tuesday pushed the U.S. dollar higher and hit Wall Street and other global equity markets as it raised fears of a new round of currency wars and fed worries about slowing Chinese economic growth. U.S. stock indices dropped more than 1 percent and stocks also fell in Asia and Europe as investors contemplated the implications of a move designed to support China's slowing economy and exports. The MSCI All World Index of global shares fell 1.16 percent. "What is good for growth in China is unfortunately bad for everybody else," said Bill McQuaker, co-head of multi-asset at Henderson Global Investors. The Dow Jones industrial average fell or 1.4 percent to 17,368.54. The S&P 500 lost 1.17 percent and, to 2,079.64 and the Nasdaq Composite dropped or 1.31 percent to 5,035.01. Companies that sell to China were hit hard, with heavy equipment maker Caterpillar losing 3.13 percent and Germany's Volkswagen dropping 4 percent. Energy and materials shares also tumbled on China demand concerns, with Exxon Mobil dropping 1.76 percent. The pan-European FTSEurofirst 300 index lost 1.68 percent, led lower...
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...www.sciedu.ca/rwe Research in World Economy Vol. 2, No. 2; October 2011 An Analysis of Emerging China’s Economy and its Influence on World Economy Zhijun Sheng (Corresponding author) School of Economics and Management, Changchun University of Science and Technology Changchun 130022, China Tel: +86-135-0445-7191 Email: shengzhijun412@126.com Jing Ma School of Economics and Management, Changchun University of Science and Technology Changchun 130022, China Email: majingdoll@hotmail.com Received: July 22, 2011 Accepted: August 21, 2011 doi:10.5430/rwe.v2n2p21 Abstract Since entering 21st century, the Chinese economy has obtained unprecedented development opportunity, growing rapidly. We emphatically analyze the remarkable performance and the immense changes of the Chinese economy in economic output, foreign trade, foreign investment and enterprise strength, etc. Finally, we point out the reality and potential influence and contribution of emerging China on world economy. Keywords: China’s Economy, Emerging Market, World Economy At the end of 2010, China’s Social Science Institute issued “World economy Yellow Paper” and “International Situation Yellow Paper”, which pointed out China has become the second biggest economy in the world, and has been in the leading position on many aspect. For instance, China ranks second on multinational merger and acquisition and surpasses UK, France and Germany to become the International Monetary Fund's third...
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...Can the Chinese Yuan become a Global Reserve Currency? Abstract China’s economy is growing ever larger, but is that enough to get the Chinese Renminbi (more commonly known as Yuan) to be accepted as a global market currency? This paper will look into the liberalization, but with Chinese characteristics, of five determining factors in becoming a country who’s currency is a global reserve currency. These factors are as follows: economic size, macroeconomic policies, flexible exchange rates, financial market development, and finally having an open capital account, and will ultimately prove the China is not quite the rising economic power some believe it to be (citation, 2012). Market Liberalization… with Chinese Characteristics In China, it is currently the year of the dragon, a symbol of good fortune and sign of intense power. With this symbol of fortune and power many Chinese are hoping for a year of economic prosperity, especially for the growth of the Renminbi, or more commonly known as the Yuan. In recent years, China has maintained that it’s “special” economy is pursuing a “market economy, but with Chinese characteristics”. Some of these characteristics include encouraging more of an international use of the currency, while being famous for their inflexibility with exchange rates, and not fully opening up the economy to the free flow of capital. However, the Yuan’s acceptance as a reserve currency will be based on China’s economic size, macroeconomic...
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...different economies around the world and the increased impact of international influences on all aspects of life and economic activity. The four main indicators of globalization include: international trade flows, international financial flows, international investment flows and the transfer of technology, as well as the movement of labour between countries. Mao Tse Tung’s successor, Deng Xiao Ping, implemented a range of radical economic reforms that transformed China into an economy with a domestic focus to one with an international focus. Since becoming integrated within the global economy, China has become a bastion of world economic growth (increase in real GDP over time) and this has enabled it to make some progress in economic development (a broad measure of quality of life). Globalisation has affected every country around the world differently. Specifically, the Chinese economy averaged 10.1% economic growth between 2003 and 2009 as a result of globalisation, causing it to become the second largest economy in the world. China experienced its annual real GDP rising from 8% in 2003 to over 11% in 2007. This high level of growth has seen China’s share of the world economy increase by 3.5% in this period to 15% in 2006, when measured in PPP terms. China’s now accounts fro 25% of world eco growth about equal to USA’s share. The main drivers of this high rate of economic growth were business investment and net exports. Despite this extended period of growth, China’s GDP per...
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...transform the global economy as we now know it. China has state-of-the-art manufacturing and India is boosting its competitive edge through innovation hubs. While the United States is deciding if “Chindia” is a threat or an opportunity the massive low wage, highly educated, and forward thinking work force is transforming these two poor nations into global powerhouses. Yet, all is not perfect. While governments and business pour mass amounts of investments into the countries there are huge obstacles to continued growth. There are social, political, and environmental challenges. Important is keeping growth at a steady pace that will eliminate the unemployment lines. Pollution and environmental challenges, political backlash, debt and currency crises, inadequate medical care, threats of epidemics, and war are continuing challenges. The next few years will see a dramatic acceleration in the shift of global economic power eastwards, according to the latest predictions from The Conference Board, an international network of leading business figures. It believes that the sluggish growth in the established economies of North America, Europe and Japan will result in their share of global GDP shrinking from around half today to a third by 2016. In line with other international bodies, such as the IMF and the OECD, the Conference board sees global growth returning next year, after the worst downturn in three-quarters of a century. The Board says that the world economy will expand...
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...Dieudonne XPGDM-18 Rohit Khandelwal XPGDM-28 Shruti Tibrewal XPGDM-32 COUNTRY AT A GLANCE Population | 1.364 billion | 2014 | GDP | $10.35 trillion | 2014 | GDP growth | 7.3% | 2014 | Inflation | 2.0% | 2014 | CHINA Economic Overview The Chinese economy experienced astonishing growth in the last few decades that catapulted the country to become the world's second largest economy. In 1978—when China started the program of economic reforms—the country ranked ninth in nominal gross domestic product (GDP) with USD 214 billion; 35 years later it jumped up to second place with a nominal GDP of USD 9.2 trillion. Since the introduction of the economic reforms in 1978, China has become the world’s manufacturing hub, where the secondary sector (comprising industry and construction) represented the largest share of GDP. However, in recent years, China’s modernization propelled the tertiary sector and, in 2013, it became the largest category of GDP with a share of 46.1%, while the secondary sector still accounted for a sizeable 45.0% of the country’s total output. Meanwhile, the primary sector’s weight in GDP has shrunk dramatically since the country opened to the world. China weathered the global economic crisis better than most other countries. In November 2008, the State Council unveiled a CNY 4.0 trillion (USD 585 billion) stimulus package in an attempt to shield the country from the worst effects of the financial crisis. The massive stimulus program fueled...
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...Why did China fare much better than the United States and the United Kingdom during the 2007-2009 financial crisis ? 1. Global financial crisis 2007 to 2009 1.1 Background The 2007-2009 financial crisis started as a sub-prime crisis in the United States (US). The Wall Street, driven for higher profits and low federal fund rate in home ownership began lending to sub-primes (Whalley et al, 2009). The mortgage loans were then re-packaged into financial instruments and sold to investors globally. When the housing prices declined in 2006, sub-primes defaulted on their mortgage loans as the values of their houses depreciated. These non-performing loans grew in sizes and led to the collapse of the mortgage loan market and collateralised debt obligations, leaving banks and financial institutions with lower net worth (Bianco, 2008). Due to the interconnected economies, the impact of the crisis spread beyond the US and resulted in a global financial crisis. | | | 1. | | | 2. | | | 3. | | | 4. | | | 5. | | | | | | | | | | 1. | | | | | | | 1. | | | 2. | | | 3. | | | | | | GDP: GDP growth (%): Considering that China’s GDP was only a third of the USA’s, its fiscal stimulus package size was significant in comparison to USA and UK, where the stimulus package were only 6% and 1.4% of their respective GDP (Fleet, 2010).. Hu Jintao committed at the G20...
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...the World Economy of Today: A look at the impact of China’s Global economic integration and Prices. Chapter one: Introduction 1.1 Introduction Since 1978, the People’s Republic of China (PRC) government has stood out in restructuring its economy from a Soviet-style centrally planned economy towards a market-oriented economy nonetheless within the political framework, provided by the Communist Party of China. This system has been called "Socialism with Chinese characteristics" and is one type of mixed economy. “These reforms started since 1978 has helped lift millions of people out of poverty, bringing the poverty rate down from 53% of population in 1981 to 8% by 2001” (OECD 2002a). Over the preceding decades, the existence of China in the world’s economy is full-fledged. Laterally, China is properly or erroneously seen to have a massive impact on the world’s economy. In today’s trade market, China is at present generally regarded to be the world’s workspace, there-by relocating some traditional exporters of labor-intensive goods, irrespective of the fact that its economy is constantly woven into the fabric of progressive split chain of making (Menzie D.2009). The emergence of China as an industrial and export livewire is undoubtedly one of the most significant forces reshaping the present-day world economy. Barry E and Hui T in 2005 stated that “A now standard way of conveying this point is to observe that the increase in employment in China’s modern sector...
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...How China rises What lessons can be drawn from China's spectacular and sustained economic growth? As Hu Jintau remarked at the 17th Congress of the Chinese Communist Party, the period since the previous Congress five years ago has been extraordinary. China's economic achievements have been arousing not only astonishment and admiration but also some anxiety. In the past twelve months alone, The People's Republic of China (PRC) has overtaken Canada as the biggest source of imports to the USA, and overtaken the USA as the biggest source of imports to the European Union. Concern about the low level of investment in Africa has been displaced by concern about the effects of the high level of Chinese investment in Africa; there is now even anxiety about the effects of investment by Chinese state-owned firms into the Western economies. The Chinese Communist Party is also expressing concerns. The themes of its 2007 Congress included protection of the environment and the achievement of social harmony. According to some estimates, China has displaced the USA as the world's biggest source of greenhouse gases. Inequality is rising as fast as pollution: China now has over 800 individuals with a personal wealth of more than a hundred million US dollars each, up from 500 in 2006; while the average income in rural areas of China is 480 dollars per year. Made in China. Hu Jintau's remark on the extraordinary nature of the most recent years can be faulted in only one sense: China has...
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...history, regarding the battle's scale, term, and the breadth and the levels of the captured authorities' positions. This battle is seen to have a country wide negative effect on China's general consumption. The effects are so particularly felt on the luxury purchases and the government related purchases. Indeed, in the current political environment and with a continuous decrease of the land division, the nation is still ready to keep up the development of its GDP with a shocking number of 7.5% in 2014. On the other hand, numerous reports from the macroeconomic business and worldwide financial organizations, (for example, the World Bank) have since anticipated a slower economic development for the current year, 2015. This paper provides a report on China's macroeconomic condition, particularly the position in the international trade and the contemporary policies in 2015. Macroeconomic Development China predominantly imports raw materials and in turn it predominantly exports industrial products, both developed and developing countries. It reported a trade surplus of US$ 49.6b and US$ 25.6b in December 2013 and 2013 respectively. Throughout last year, exports rose by 9.7% to US$ 227.5b in December. Interestingly, shipments tumbled to Japan at -7.2%. Figure1. In the appendix represent the trend of China’s Balance of Trade between January 2014 and January 2015. Imports diminished by 2.4% to US$ 177.9b. In the interim reports, percentage reports were recorded as the Australia (3%)...
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