As the first two months of the new year wrap up, there is some sobering data and speculation about the current state of the Chinese economy in the news.
2016 started with a bang (or bust, really) with trading in Chinese stocks being halted twice within the first week by Chinese regulators after the Shanghai 300 Index dropped more than 7%. This volatility quickly rippled across international markets from the US to Germany to Australia. While this erratic behaviour could spell trouble for the Chinese economy, American economist Paul Krugman believes that if the Chinese market were to crash, it wouldn’t resonate nearly as strongly as a US crash would. This assertion is based on the relative insularity of the Chinese market, though a crash would no doubt strike the Australian economy more than most, given the strong ties to Chinese industry.
That sentiment, though, may not be as reassuring to Australian businesses, especially those who rely on trade and manufacturing from China. China reported overall GDP growth of 6.9% for the 2015 year. While this is down significantly from a peak of nearly 15% in 2007, it has remained relatively steady since the end of the 2013 year.
The constancy of this GDP growth, however, has some economists outside of China wondering if those numbers are rooted in reality. In fact, according to Business Insider Australia, many market watchers “suggest that the figures are merely a by-product of the government starting with the headline figure first and then working backwards, rather than the other way around.” Were such an assertion to prove true, the impacts on manufacturing and future growth would be staggering, depending how drastically those GDP figures were off.
While it still may be too early to make any assumptions for the remainder of the 2016 year, this year will certainly prove to be one of hand-wringing for market analysts at home and abroad. No matter what happens with the Chinese economy, the world will be watching and responding accordingly.
During this time, our team at Mawson Global will be working closely with our team in Asia to ensure our clients’ needs continue to be met without any delay in service. If you would like to learn more about how Mawson Global can help your business save money, please contact us or take the Savings Challenge today!