Why China Is Shaking the World

China’s continual slowing economic growth seems to be an inevitable trend, a difficult position that fears the world. The concern among the international investors is that the second largest economy and world’s long trustworthy growth engine may stop contributing its significant part to the global economic growth. This fear is intensified by the oil-price slump, subdued economic expansion in Eurozone as well as other geopolitical worries.

The Chinese stock market crash

china-stock-market (1)
The stock market in China experienced a major market crash in the middle of year 2015 soon after the Shanghai Composite Stock Market Index reached a peak of more than 5,000 points. Significant aftershocks happened around 27 July and 24 August’s ”Black Monday.” By 9 July 2015, the Shanghai stock market had fallen 30 percent over three weeks in term of market value. In order to relieve market fears, the newly implemented stock market circuit breaker mechanism were suspended by the China Securities Regulatory Commission (CSRC) (chinadaily.com.cn 2016).

Slowest pace in economic growth & job creation
In 2015, the official data showed that China grew by 6.9% in term of Annual GDP (Gross Domestic Product) Growth, affirming a multiyear slowdown. GDP growth in China is expected to continue to slow to 6.50 percent in 2016, according to Trading Economics global macro models and analysts expectations. In the long run, the China GDP Annual Growth Rate is estimated to trend about 5.50 percent in 2020, calculated based on the econometric models of Trading Economics (tradingeconomics.com 2016). Though 5%~6% annual GDP growth is significant and acceptable to most other countries, it is not satisfactory and may lead to economic uncertainties in China. Back in 2013, Premier Li Keqiang claimed that the Chinese economy had to create 10 million jobs per year and must sustain a growth of at least 7.2% to achieve the job creation target (cnn.com 2013).

China is the world’s biggest economy
china largest economy
Source: IMF, Google Public Data Explorer

According to the IMF, since 2014 China had surpassed the US in terms of GDP based on purchasing power parity (PPP), crowning the largest economy in the world based on the measurement, In the same year, China contributed $17.6 trillion or 16.48 percent of the global purchasing-power-adjusted GDP, at the same period the US created a little less, 16.28 percent or $17.4 trillion of the world’s purchasing power.

Being the world’s factory, China produces approximately 80 percent of the world’s air-conditioners, 70% of mobile phones and 60% of shoes…Currently, China manufactures nearly a half the world’s goods. In line with the huge production scale, China consumes a large amount of raw materials. As the above chart shows, in 2015 China used almost a half of the world’s aluminum, nickel, copper and zinc. In another world, when the manufacturing activities become less vivid, the influence to the world economy can be obvious and enormous.

List of reference

chinadaily.com.cn 2016 China suspends stock market ‘circuit breaker’, accessed on 4th Mar 2016 [online] available: http://www.chinadaily.com.cn/business/2016-01/07/content_22985515.htm

cnn.com 2013 China needs 10 million new jobs a year accessed on 4th Mar 2016 [online] available: http://money.cnn.com/2013/11/05/news/economy/china-growth/index.html

tradingeconomics.com 2016 China GDP Annual Growth Rate  Forecast 2016-2020 accessed on 4th Mar 2016 [online] available: http://www.tradingeconomics.com/china/gdp-growth-annual/forecast

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