There’s a popular saying that “when the United States sneezes, the rest of the world catches a cold.” But what happens when China is unwell? The world is witnessing the effects of the depression on the Chinese economy. China is the second largest economy in the world and the home of over 1.4 billion people. And the country is facing a congregation of troubles including various facets of slow growth, high youth unemployment rates, and a scarcity in market disorder.
The chairman of Chinese real estate developers, Evergrande, is heavily in debt. The company has been placed under surveillance by the China police. In the stock market, the shares of this company also have been suspended. Each of these issues adds a major headache for Beijing, but the matter is how much is this impacting the whole world.
According to several Analysts, the situation of the Chinese economy is worrying, but regarding it as if the situation has the potential to bring global economic catastrophe would be overstatement. However, multinational organizations and their employees are bound to face the outcome of this. Even though these companies are not directly linked with China but will also witness the consequences.
The executive director of the Asian Trade Centre in Singapore, Deborah Elms questioned, “If Chinese people start cutting back on eating out for lunch, for example, does that affect the global economy?” Later she added, “The answer is not as much as you might imagine, but it certainly does hit firms who directly rely on domestic Chinese consumption.”
Bing companies like Apple, Volkswagen, and Burberry have to go through a lot to get their revenue from China’s vast consumer market. Thousands of goods suppliers are about to feel the intense knock-on effects due to the situation. The world has to consider that China is responsible for over a third of the growth the world has seen by far. And any sort of internal declaration can be felt beyond the Chinese geographical border.
Last month, the US credit rating agency, Fitch said, China’s economic slow down “casting a shadow over global growth prospects”. The agency also mentioned that it will be downgrading the forecast for the entire world in the next year, 2024. However, some economists are indicating that China will regain their strength but they also have stated that China’s engagement for global prosperity is nothing but an exaggerated statement.
An economist at the University of Oxford’s China Centre, George Magnus said, “Mathematically, yes, China accounts for around 40% of global growth.” “But who is that growth benefitting? China has a huge trade surplus. It exports so much more than it imports, so how much China grows or doesn’t grow is really more about China than it is about the rest of the world,” he added.
Ms. Elms is one of the few people to anticipate the global impact of 2008 subprime mortgages in Las Vegas. She said, “China’s financial system is not dominant enough for there to be a direct global impact like we saw from the United States in 2008.”