Economic Crisis In China

907 Words4 Pages
China has been as a global economic and trade power and recently has emerged as the second largest economy in the world. China conducts trade with many partners Europe, Britain and the United States which is by far its largest clientele. Hence in 2008, when the US had a significant economic downturn and financial crisis, the effects filtered down to many other territories and negatively impacted them. As a result of the significant reduction of buying powers of US consumers; pressure was placed on China’s economy. While it seemed that china was coping with the effects from the International Financial Crisis fairly well, it is now being faced with additional problems as both Europe and Britain who make up for a vast majority of its clientele are also experiencing economic uncertainty. China’s exports, imports, and FDI inflows declined, GDP growth slowed, and millions of Chinese workers reportedly lost their jobs. China’s real GDP growth fell from 14.2% in 2007 to 9.6% in 2008, to 9.2% in 2009 and currently in 2013 is 7.6%. According to Wayne M. Morrison, China has the ability to maintain a rapidly growing economy in the long run but this will depend largely on the ability of the Chinese government to implement comprehensive economic reforms and a rebalance of the Chinese economy by making consumer demand, rather than exporting and fixed investment, the main engine of economic growth; boost productivity and innovation; address growing income disparities; and enhance environmental protection. The Chinese government has acknowledged that its current economic growth model needs to be altered and has announced several initiatives to address various economic challenges. As mentioned before, a result of the financial crisis being faced... ... middle of paper ... ...China economic crisis can be seen to have an impact on Multinationals in Caribbean economies. Recommendations It is recommended that derivatives be used to hedge risk of foreign currencies. To hedge this risk it is recommended that these MNC’s purchase currency futures to lock in exchange rate for the future stock sale and currency conversion back their home currency so that they are not exposed to exchange-rate risk while holding that stock. It is also recommended that these multinationals invest in high yield bonds, shares and properties as a means of protecting their capital against effects of inflation. It is further suggested that multinationals diversify their portfolios by splitting up investments in to different assets which may reduce the likelihood of sizeable losses and would allow for more consistent performance under the current economic conditions.
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