China and Its Impact on Global Economy

Topics: Economics, Inflation, Currency, Central bank, Foreign exchange market, Investment / Pages: 7 (1698 words) / Published: Jan 25th, 2013
Corporate Finance

EMBA Monthly – Class of 2013

Individual Assignment
“China and its impact on Global Economy”

Submitted by: Muhammad Shahir Ejaz

China and its impact on Global Economy
China’s Rise and its current economic outlook:
China’s rise as the world’s second largest economic power started from the Industrial boom brought in by the Communist Government’s realization of the relaxation of trade policies about 30 years ago. The main focus of the government was to bring social stability into the lives of a generally poor nation. Majority of the population were inhabitants of farms and were living below poverty line. The governments focus on building industries has brought the opportunity for individuals to move from their farm lands into cities and improve their individual economic status.
As per IMF’s Feb 2012, report for China’s Economic Outlook, the current economic conditions are stated as follows:
China’s economy is slowing, but remains a bright spot in an unpredictable global economy * Growth is expected to stay above 8 percent in 2012-13 * Inflation is coming down to more comfortable levels * The real estate market is deflating
A storm emanating from Europe would hit China hard * China’s growth rate would drop abruptly if the Euro area experiences a sharp recession * But China has room for a countervailing fiscal response, and should use that space * Unlike 2009–10, any stimulus should be executed through the budget rather than the banking system
The weak global outlook reinforces the importance of rebalancing China’s economy * This means more private consumption and a diminishing reliance on investment * Financial and corporate sector reforms will be critical to achieving this economic transformation
Demand analysis:
China’s demand can be broken down into 2 major sectors: 1. Domestic demand for social stability:
The demand in this sector is mainly related to housing and construction of the

References: [1] Source for IMFs report on China 's economic Outlook: [2] The US-China Business Council: [3] The Guradian: [4] Article: Why China keeps increasing US debt holdings, By Yi Xianrong (Beijing Times). August 19, 2011: [5] Economy of the People 's Republic of China: 's_Republic_of_China#cite_note-85 [6] Article - The Wall Street Journal| The Outlook, 11th April, 2011: [7] Blog - Rediff Business - Why China keeps its currency undervalued: [8] Blog - Rediff Business -

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