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China’s slowdown affects global economy
China’s slowdown affects global economy

According to several experts, China's economic slowdown can be extremely dangerous for the rest of the world. Analysts are sure that in the event of prolonged stagnation, China will become a burden on the global economy.

Currently, there is no sign of crisis: China is getting richer at a pace unprecedented for developed economies. However, the annual growth slowed down to 6.6 percent in 2018, while in 2017, it reached 6.8 percent. According to forecasts for the current year, the country's economy may weaken further to 6.2 percent.

Analysts believe that China's trade war with the US is the main reason for this recession. However, experts claim that a much deeper problem lies in the internal politics of the country.

China is the largest exporter and importer of raw materials in the world, its economy ranks second after the US. Therefore, a slowdown in China’s economy directly affects the global economic system. Experts name three key problems of the Chinese economy and their possible consequences:

1. Reduced consumption. Chinese shoppers are buying fewer electronic products, cars and luxury goods. This has a negative impact on Western manufacturers, such as Apple, BMW or Tiffany. Earlier, private consumption in China exceeded $5 trillion per year.

2. Slowdown in production and construction. Problems in these industries reduce China’s need for oil and steel. This causes a fall in global prices and losses for large exporters of raw materials, such as Russia or Australia.

3. Fewer foreign investments. Earlier, Chinese authorities invested billions of dollars in foreign infrastructure, but now they have to revise their expenses. The new Silk Road flagship project may also suffer affecting its main participants, from Ukraine, Russia and Kazakhstan to countries in Asia and Africa.According to the International Monetary Fund (IMF), China's GDP growth weakened last year. The IMF believes that a further decline may lead to a collapse of financial and commodity markets. Analysts at the Financial Times are sure that the future of the global economy depends on how China will solve the problem of slowing economic activity. The Financial Times believes that this is a crucial moment for China's economy. Over the last century, success or failure of one country have never been so important to the whole world.

Published: 2019-02-04 19:28:56 UTC
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