07 Dec The Chinese Economic Downturn
Doing business in China and how by learning their language can benefit, however, the Chinese economic growth is currently slowing down. It was the second largest economy but it doesn’t seem to go on their favour for long. It’s in fact currently in their weakest growth for the past 25 years. And yet because of their enormous market size and a chunk full of reserves at their government directive, the communism government is able to fend off a hard landing scenario for their economy, by infusing much needed money to the Chinese market and making sound financial reform in their overly bloated industries. With an estimated US $3.23 trillion foreign exchange reserve, this give China a larger elbow room to manage their economy in their current goal of transitioning from the externally volatile manufacturing and exporting economy to a more sustainable service and consumption-driven economy.
The Slowdown of the Chinese Economy
Because of the slowdown of the Chinese economy, the whole world are affected by the low demand of goods to the second largest economy. The best example of this is the volatility of the price of crude oil. China already filled up their oil buffer, reducing the demand of these black gold. While the number of oil supplier are still the same, the demand from China decreases. This prompted an oil crises which affect mostly the oil supplying nations, flooding the world with overly cheap oil. Also, China is considered the largest buyer of commodity from the global market, the weakened demand from China undermined the production of the global market.
In the past 15 years, most of the large companies in the world want to penetrate in the Chinese market which was generally untapped and valued larger than the US market. Most of them built factories and allow the government to scrutinize their trade secrets to please the Chinese Government, one of the infamous criteria to gain entry to the Chinese market. But disclosing this information allows Chinese Government to copy their trade secrets and reverse engineer their products and give them to Chinese companies that these official partly or wholly own. This gave rise to their very own competitors and also the reason why the Chinese policies are mostly against foreign companies to protect their own pockets. This disheartened investor and causes the pullout of investment to the country. There might be investors and businessmen who have took time to learn business Chinese, not knowing that their effort may not be paying off as much.
Cracking Down the Chinese Corrupt Officials
But the communist Party Chairman Xi Jinping, saw this trend and that is why he started cracking down on these corrupt officials. A number of Chinese official was arrested and tried for corruption. Because of this, the Chinese political landscape was overhauled. And many policies were changed overnight. Given the various crackdown on corruption and several fiscal reform that the Chinese Government are undergoing to stabilize and strengthen their economy, it is still too soon to say if they have what it takes to prop up their economy which in turn will bolster the global economy. Will this reform be sufficient enough to fix the investor confidence and stop the bleeding of Investor money out of China in time? Or will this be just a superficial change of a cover up of lure naive investors? Only time will tell if everything will be for naught.