China’s economic slowdown, specifically in the manufacturing sector, has become an issue, and the more recent ups and downs of the stock market have only exacerbated the problem. China’s stock market has stumbled quite a bit in the last few weeks, despite the efforts of China’s central bank to stabilize the nation’s economy. As the world’s second largest economy, China’s instability has a direct impact on the economies and stock markets around the world. That being said, stocks of U.S. companies with links to China, such as Apple, took a noticeable hit the last week of August.
It could be said that China is the production powerhouse of the world. However, with an investment-based economy paired with decreased global consumer spending and demand, China’s economy has become increasingly sluggish. That being said, China’s economy is headed for a major crisis if reforms are not put in place soon.
The problem is more than simply an economic slowdown in China-but its impact not the world. The problem is a vicious cycle in which the general global slowdown has caused the economic problem in China which, in turn, impacts other economies around the world, and which slows down the global economy–and repeat. China itself has had problems for years and this recent slowdown has further decreased confidence in the economy. China’s economy has been growing significantly for years due to rapid massive investments in both the private and public sectors. These levels of investment and rapid growth cannot be sustained for much longer.
China needs to reengineer its economy without causing it to completely crash. First, China needs to increase consumer spending by creating more confidence in the economy. They could do this by switching to consumption-led growth rather than investment-led and export-led. Second, China needs to make investments within their own country such as investing in public consumption and environmental improvements.