Challenges associated with China’s economy: Dragon Stumbling, World Ok


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News: At present, China’s economy is growing significantly slower than other emerging markets for the first time in three decades. But the present rapid slowdown in China does not impact the world economy like it used to be. This is against the popular saying that as China goes, so goes the global economy.

China accounted for around 35% of global GDP growth in the years before the pandemic, but that share dropped in 2020 and is now around 25%.

Why Chinese economy is slowing down?

China is facing the drag of a shrinking population and its massive debts.

-China has been turning inward, replacing a growth model driven by trade with one driven by domestic consumers. China launched Made in China 2025 campaign in 2015 to become more self-sufficient by buying more supplies and developing more technology at home. That means relying less on the US and other emerging markets.

-The US and other European nations adopted policies to “decouple” from China. This resulted in buying more supplies from China’s commercial rivals, like Mexico, Vietnam and Thailand.

Read more: Economic Survey suggests Chinese formula to create 4 crore jobs by 2025
Why the global economy is not slowing when China is slowing down?

-Earlier, other economies were in close sync with China. But economic links have weakened during the pandemic,

Promotion of greener technology: This is raising prices for all kinds of raw materials, which are the main exports for many emerging markets. “Green metals” like aluminium and copper, which are essential to electric vehicles as well as wind and solar power, are supplied mainly by emerging markets such as Peru and Chile.

Other global growth drivers are gaining momentum: The digital revolution is raising demand for computer chips and other high-tech products, boosting exports out of advanced emerging markets like Taiwan and South Korea. Similarly, Mobile internet technology is rapidly transforming the domestic economies of larger, less advanced emerging markets.

Note: Worldwide, mobile technology accounts for about 10% of cumulative income growth, and these gains are expanding faster in emerging markets than in developed ones. For example, Indonesia, India, etc.

Much of this boost comes from online services, ranging from finance to entertainment and shopping, which can grow rapidly and simultaneously in all emerging markets.

 

Read more: Economic lessons for India from the Evergrande crisis in China

Source: This post is based on the article “Dragon Stumbling, World Ok” published in Business Standard on 13th December 2021.

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