China’s economy has reportedly witnessed the slowest growth since 1990. It expanded to 6.6% in final quarter of 2018 cooling from 6.7% growth rate of the prior quarters, yielding the lowest quarterly growth rate since global financial crisis.
What Caused Slow Down of China’s Economy?
There are several external as well as internal factors that have contributed to the slow growth of China’s economy.
Trade War with the United States
One obvious reason is the country’s trade war with the United States. Growing number of tariffs being placed on Chinese products by the US is barring its access to American market. Last year US President had shown his intention to block China from acquiring the US companies.
Ever since Donald Trump became, President US-China relations have been deteriorating causing Beijing to take an aggressive stance.
Domestic Driven Deceleration
US-China trade war is the one reason for slowdown of China’s economy, but there are some internal factors as well. The country’s economy is reportedly facing a slump due to contraction on infrastructural spending and low sales of cars.
How It is A Concern for the World
Slow economic growth is indeed a concern for China, the world’s second biggest economy. Corporates heads and economists are worried that slowdown of economy will further lead to reduction in jobs and sluggish trend in stock markets due to decreased investors’ interest.
But, it is also posing a serious challenge to the world’s economy as whole. The fact is obvious in the form of China’s huge population which is largest in the world. So, one third of the world looks towards this country to sell commodities and buy cheap alternatives (factors that contributed to rapid economic expansion.
Cooling down of growth in China’s economy will impact individuals as well as corporates. The recent drop in Apple sales is one such example; one reason for the smartphone giant’s drop in revenue were the lost interest of Chinese market.
It Might Pave Way for Next Global Recession
China is the major economy of the world and accounts for the significant portion of the global GDP. Economists believe the slowdown of the Chinese economy will negatively affect the world economy and may even become a cause of the global recession. Many US businesses are dependent on China as it provides the cheapest and largest labor.
There is also an optimism that the Chinese economy will improve in 2019, but this is likely to do very little to attract the investors’ interest.
Steps to Improve the Economy
Economist have been for years predicting that China’s economy is slowing down. So to them, this is not news. The country reportedly deliberately slowed down the growth to focus on quality rather than quantity.
Chinese Policymakers have stepped up their game. They are trying their best to resolve this issue. They have already introduced tax cuts and a soft fiscal and monetary policy. The country has even adjusted the reserve requirements by the banks to increase the pace of developmental activities.