Htet Tayza questions whether the Chinese slowdown could hold the global economy back in 2016.
The rise of China’s middle class has turned the People’s Republic into the largest growing economy in the world. Increased consumer spending has allowed China to record consistently high economic growth in the years since the international economic crash of 2007/2008.
Yet the Chinese economy was hit this year by Beijing’s decision to devalue the Yuan currency. The BBC reported that economic growth in the People’s Republic fell to 6.9% in the third quarter of 2015 – the first time this figure has dropped below the 7% mark in years.
The rise of the Chinese economy has lifted the international economy along with it. The People’s Republic has fuelled its own growth by buying a lot of raw materials, such as copper and oil, from other countries, injecting cash into their economies. According to CNN Money, experts have suggested that if the Chinese economy continues to slow down, it could hold the world back in 2016.
The Organisation for Economic Co-Operation (OECD) predicts that the Chinese economy will expand by 6.5% next year, while the International Monetary Fund (IMF) predicts the figure will be 6.3%. The Conference Board, an organisation which measures international economic activity, expects the People’s Republic’s GDP to grow by a paltry 3.7% next year.
Looking to 2016
However the OECD expects global economic growth to expand from 2.9% in 2015, to 3.3% next year. Furthermore The Conference Board predicted that the international economy will grow by 2.5% this year, and 2.8% in 2016. These numbers seem to suggest that the People’s Republic might not restrain economic growth next year.
This depends on the nature of the slowdown that gripped the Chinese economy in 2015. Many experts, such as Bart van Ark, chief economist at The Conference Board, believe that the economy of the world’s most populous nation is currently experiencing a ‘soft landing.’ He said that “the good news is this is not a hard landing,” and that “a lot of the heat has already been taken” – implying that the worst impacts of China’s economic slowdown have now passed.
Htet Tayza comments
In my opinion if the worst effects of China’s slowdown have already passed, the rest of the world will be able to rebound and move on next year. Reduced Chinese economic expansion will undoubtedly hit countries that depend on China for trade. However India and other emerging markets are set to record impressive economic expansion in 2016, and this could lift the entire global economy.