China’s Economic Struggles: What Lies Ahead?

Over the past two years, China’s share of global GDP has significantly decreased. During Mao Zedong’s era, meaning in the 1960s and 70s, China wasn’t doing anything special. Then, in the 1980s, China opened its doors to the world, and then it soared! China’s share in the global economy increased so much that no other country had ever grown so rapidly.

But China is currently struggling. What’s behind this, and how could it benefit India?

Let’s understand.

What’s Happening?

According to Mint, for many years, major global companies were shifting towards China. They hoped to profit heavily from the rapidly growing middle class there. To a large extent, this strategy was successful, but things have changed over the past year. Due to the restrictions of the COVID-19 pandemic and the prolonged real estate crisis, China’s economy has stumbled. Unemployment among the youth is rising, economic forecasts are bleak, and even the country’s largest real estate companies have closed down.

China’s Struggle Story

According to Mint, China’s economy is currently grappling with several difficulties. The country has been troubled by the ongoing real estate crisis for the past few years, and inflation has caused considerable trouble over the past 25 years.?

Additionally, there has been a decline in exports in 2023, which was previously a key driver of the country’s development. Youth unemployment is also increasing, and local governments are burdened with significant debt.

While the government of Xi Jinping claims that the economy grew by 5.2% in 2023, many people doubt its authenticity. Certainly, assessing a country’s economy solely based on GDP is not entirely accurate. However, these figures indicate that the Chinese economy is not on the right track and is facing many challenges.

The State of the Chinese Stock Market

According to Business Insider, although the Chinese government is trying to stabilise the market, investors are still cautious. While there has been some slight growth in the stock market, there is still a downturn. This can be inferred from the fact that as of February 1, 2024, the Hang Seng Index of Hong Kong is down by 9% for the year and 4% for the past week. Similarly, China’s CSI 300 Index is also down by 6% for the year and 4% for the past week.

Furthermore, China’s economic indicators are also worrying. According to government figures, in January, large and state-owned manufacturing companies remained pessimistic for the fourth consecutive month.

How can India Benefit?

The question now is whether India can benefit from China’s economic slowdown.?

Let’s understand:

Profit in Trade:?With China’s economic downturn, people and countries around the world will explore other trade options. This could open up new business opportunities for India, and major companies may shift their focus from China to India.

Increased Investment:?Currently, investors and companies withdrawing their money from China may seek to invest elsewhere. India could be a promising option for them. This could lead to the development of new industries in our country, and employment opportunities could also increase.

Efforts to Improve the Chinese Market

According to Business Insider, after a significant downturn in the Chinese stock market, China’s Central Bank has taken an important step to increase investor confidence. They have reduced the amount of reserve cash held by banks. This will inject about $140 billion into the banking system, which is expected to bring money into the market and encourage investors to reinvest.

How effective this step will be is difficult to say at the moment. However, it certainly indicates that the Chinese government is serious about stabilising the market and getting the economy back on track.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The article is for information purposes only. This is not an investment advice.

*Disclaimer:?Teji Mandi Disclaimer