Economic slowdown in China taking its toll

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By Jacob Maslow

Chinese Yuan vs US Dollar
US one hundred dollar versus China Yuan currency

The Chinese economy has shown signs of tremendous growth over the past century, however as of recently, their economy has hit a ‘minor’ bump and is looking at a slowdown that may intensify over time. China’s manufacturing industry has shown decreasing output over the past 18 months resulting in reduced employment opportunities, the decrease in new orders has had an effect on the economy, although the major concern is with the declining employment opportunities and debt defaults.

Despite several efforts in reversing the slowdown, economist Zhang Liqun from the Development Research Centre states that the growth is still decreasing, the rate at which it is decreasing is slowing down. He also comments “The current economic situation is in the process of returning to stability from slowing down.”

Another source comments that the treasury has predicted the country’s growth to drop below 7 percent despite their goal of 7.5 percent. This is the first time that the Chinese economy has dropped that low in almost 24 years. Some analysts believe that the growth could drop significantly lower if the issues at hand are not dealt with in a proper manner.

The analysts have referred to several statistics such as the fact that China’s manufacturing industry has been declining for several months now, in the past from 2001 to 2013, their steel industry increased production at an average rate of 16%, but the reports indicate that the excess steel is being exported when no longer needed domestically. The World Steel Association provided figures that show decreasing steel production from 821.4 million tonnes to 805 million tonnes, such a decline has not occurred since 1981.

The declining manufacturing industry has resulted in major layoffs, which in turn affected the housing property sector in China. Many companies and individuals are having trouble paying off their debt with the declining manufacturing industry, the analysts are predicting that the number of debt defaults will continue to increase. This leaves the service industry as the highlight of the country’s economy.

In response to these recent events, several measures are being placed to tackle the problem. The central bank is decreasing the interest rates and has also provided more funds towards the banks encouraging financial institutions to give out more loans. Furthermore, the number of infrastructure projects being approved is increasing. Several measures are being taken to reverse the economic slowdown, and so far there have been positive results.

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