China's Slow Growth & its Impact on Indian Market





Subscribe to our newsletter

By subscribing, you agree with Revue’s Terms of Service and Privacy Policy and understand that Tribe's Weekly will receive your email address.

Tribe's Weekly
Tribe's Weekly
Economic growth in China is projected to slow down to 4.3%

China's Slow Growth & Its Impact On India
China's Slow Growth
China's Slow Growth
The world’s 2nd largest economy is slowing down & it is a warning for the economies around the globe. For decades, the world has been dependent on China as it has been the world’s manufacturing hub & a major importer of many goods.
The demand for Chinese products & exports is decreasing due to increasing prices & rising interest rates.
As per International Monetary Fund data, China in 2021 accounted for 18.10% of the global gross domestic product. China also accounts for one-third of global manufacturing output according to United Nations data.
Inflation In China
China’s inflation rate increased to 2.7% in July 2022 which was 2.5% in June 2022. This is the fastest rise in consumer prices since July 2020. This increase is mainly due to an increase in food prices. 
However, China’s inflation rate has been comparatively low as compared to other economies around the world as China gives more weight to food & clothes which fits its status as an upper middle-income country & such prices are not being affected as easily as that of shelter & transport that depends on global energy. 
China’s lower inflation is also a result of domestic demand caused by Beijing’s zero-Covid policy, which has been used to contain the highly dangerous Omicron variant since March.
China Inflation Rate
China Inflation Rate
After COVID-19
Covid-19 has emerged from China and spread around the world & became a pandemic. It was not only a health disease but also a threat to economies all over the world. Covid-19 had a significant impact on Chinese businesses & industries as it was the livelihood of millions of people. Due to the outbreak of the pandemic, imports fell by 4% year on year & exports from China fell by 17.2% year on year.
China was recovering from Covid-19 and was having a great start in early 2022 but the multiple outbreaks of the Omicron variant of Covid-19 & further restrictions again affected the normalization of China’s growth.
Economic growth in China is projected to slow to 4.3% in 2022 before rebounding to 5.2% in 2023, largely reflecting the economic damage caused by the existence of COVID-19. If Covid-19 is controlled with fewer restrictions, then the growth for the year could be higher than projected.
Covid-19 Stringency Index for showing countries taking strict measures
Covid-19 Stringency Index for showing countries taking strict measures
What Led To The Situation
Apart from the outburst of Covid 19, the other reasons that led to China’s slowdown in growth can be explained in the given points:
Economic weakness in U.S. & Europe
China has been dependent on exports for its growth, but exports have fallen drastically in April. The main reason for the fall in exports is the recession in European countries & the slow recovery. It is hard for the Chinese to sell their products to Europeans as they have no money to spend.
A fall in domestic demand
China’s imports in April increased by 0.3% from the previous month. This is the lowest figure since the global economy is in the financial crisis of 2009. This data indicates that Chinese businesses “appeared to lose much of their need for products as varied as iron ore & computer chips”.
Housing & Banking are a mess
China’s housing market has become a real estate bubble. Besides this, the country’s bad banking sector has inflated the bubble & it can collapse anytime soon.
Corrupt political system
Many of China’s economic problems are due to corrupt politics. Economists are encouraging the government to open up the economy with private investment & currency reforms, but such changes could be disastrous for the economy. 
Global Impact
As China is the fastest growing economy in recent years, it is expected to contribute significantly to global economic revival after the pandemic. The Chinese slowdown is expected to pull down global economic prospects.
China plays a crucial role in the global supply chain. Being a large supplier of critical chemical & industrial intermediates & consumer goods such as electrical equipment, plastics & toys to the developed world. It made China a global manufacturing hub for consumer goods & electronics.
 A Chinese slowdown has impacted global trade for all these products. On the other hand, China is also a large consumer of commodities ranging from petroleum products to iron ore & copper. A slowing Chinese economy can thus cool global inflation. The effects of China’s slowdown are affecting everywhere from German factories to Australian tourist spots.
Companies including Apple Inc. & General Electric Co. warned investors about production & delivery problems resulting in China’s troubles, as well as lower sales.
The weakening economy is bad news for commodity exporters such as Brazil, Chile & Australia that supply China oil, copper & iron ore. It is also bad news for manufacturing powerhouses such as Germany, Taiwan & South Korea that rely on China as it is a huge market for their machinery, cars & semiconductors, as well as a critical link in the worldwide supply chain for their companies.
Impact On Indian Economy
China's slow growth & its Impact on India
China's slow growth & its Impact on India
The Chinese crisis is both a challenge & an opportunity for the Indian economy. India has to rely on China for many pharma & chemical products, capital goods, automobiles & electronics components. Any change in Chinese supplies can affect these industries negatively. However, lower Chinese consumption of industrial goods & fuel can control imported global inflation, which has been pushing up WPI & CPI inflation rates in India. India has the potential to become an important global manufacturing hub for those companies seeking an alternative to China as most of America’s leading companies have either set up large technology operations in India or continue to rely heavily on India-based IT companies. India can convert this challenge into an opportunity by importing goods from other countries. It will help India rely less on China. India also needs to build capabilities to make these products in the domestic market. This Chinese crisis has given an opportunity for India to make itself a global manufacturing hub. The majority of the Indian population is young who seeking employment opportunities & if one can bring global investment to India it will be a win-win for all. Apart from converting economic challenges into opportunities, India could also reposition itself as a major political power both in Asia & at the global levels.
China is a major economy & has a global impact. The slowdown of the growth of China could be used as an opportunity by India to promote the Make in Indian products & also become a global power.
Did you enjoy this issue? Yes No
Tribe's Weekly
Tribe's Weekly

Social platform where investing is easy, engaging and more rewarding.

In order to unsubscribe, click here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Created with Revue by Twitter.