Recent economic data from China suggests that Chinese economy attains some stability. Chinese economy slowly regains its rhythm after the massive stimulus measures Chinese authorities had launched soon after the summer stock market crash. China is the largest populated country with 1368 million inhabitants. The announced infrastructure stimulus measures will help overall investment, but adjustment in several heavy industries is set to continue and this stimulus is not sustainable in the longer term.
Chinese GDP growth considerably decreased from 10.5 in 2010 to 7.4 in 2014. Its GDP per capita was 7574 USD and inflation is about 2% in 2014. It is estimated that economic growth will continue to decelerate in 2016. Slow growth rate in China is due to recession in industrial goods production sector. Economic growth is projected to decline gradually to 6.2% by 2017.
Slowdown of Chinese Economy – Global Impacts
Stock markets around the world are volatile because investors are afraid that the world’s second-largest economy will drag other countries down with it. China is a major buyer of commodities like oil and copper. When China does not purchase as much, like before, countries like Australia and Brazil that provide those commodities to China really suffer.
The slowdown in the Chinese economy hit a new low in the third quarter of 2015. China’s growth rate slipped below the 7% mark to 6.9%. China’s economic slowdown could pose risks for the euro area ranging from falling exports, capital outflows and exchange rate fluctuations – the European Central Bank (ECB) said on November 2015. Some of the reasons for meltdown in Chinese economy are global recession, domestic housing sector slowdown and steel industry breakdown.
The global economy is right in the middle of a significant transition, in other words, as rich economies try to normalise policy while China tries to rebalance. That transition is proving a difficult one for policy-makers to manage, and markets strain.
Positives for Indian Economy
If India continues its economic reforms and boost investment in infrastructure, it has the potential to grow at 7% to 8% per year for a longer period. Meanwhile, the Chinese economy is in transition from a high growth economy to a more mature economy whose potential growth rate is gradually moderating below 7% per year. Therefore, India can hold its status as the fastest growing BRICS economy over the medium to long term.