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China's economy has politicians, investors, and businessmen all over the world biting their nails in nervous anticipation. Business and investment in the country have become increasingly risky and low expectations have been predicted for several sectors of the economy. The country as of late has been able to hold their own and beat their dismal forecasts; however if it does not stabilize its economy soon, it could prove bad news for the country and for the global economy.
Recent figures seem to show that China is off to a good start. China beat global expectations last year by showing economic growth of 7.7% at year's end. In January, the country started off with a 10.6% rise in exports and a 10% rise in imports, accruing a trade surplus of $31.9 billion. However, not all is so rosy. China's HSBC manufacturing index has fallen for the fourth month in a row, the Shanghai stock market is down in the midst of stock market rises in neighboring countries, and the 7.7% economic growth figure is also China's slowest annual growth in over a decade. Business has also been discouraged in China lately because of the increased fear of corruption. About 25% of companies avoid China for business because of the increased regulation by Western forces and the economic slowdown, which have both been leading to greater corruption risk. Without more international business involvement in China, it is unlikely they will be able to improve many of their problems anytime soon.
The biggest problem for China, however, comes with the global impact of its economic slowdown. Economic analysts think China has a large chance this year of hitting a 'hard landing': a fall of GDP growth below 5%. If this happens, global GDP growth could overall be reduced by 1.5% over the year. The impact stems from trade: China is the biggest importer in Asia. As a result, countries that export to China will suffer. Setbacks in GDP growth rates could be felt in countries such as Taiwan, South Korea, and Malaysia by up to 4.5%. The impact could also potentially be felt in farther regions such as the Eurozone and the United States, although these areas would have much less of a growth cut. To fix these problems, the Chinese government is attempting to stabilize the economy. The current plan is to slow leveraging, which will cause China's economy to incur an even slower growth rate. However, it is hoped that other factors such as consumer spending and exports should be able to make up for this. China has already taken over the United States' original spot as the biggest trader of goods in the world.
Overall, China's economy is proving to be a major cause of worry all over the world. It is clear that the path it goes on from here on out can go one of two big ways. Do you think China can stabilize its economy and end its woes?
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