Slowdown of China's Economy

Slowdown of China's Economy

Introduction

China's economy has grown with the passage of time. The country has been growing and expanding since a number of years. The world has seen a rapid change in the policies of the country's way of operating and in ensuring that its economy expands more and more. The country has earned a lot with its growing economy and has been a fear for the superpowers since many years. It was also feared that the Chinese Yuan would become the international currency by replacing dollar in the international market. However, now things are not as same as they were a few years ago for China. This paper will discuss the situation of Chinese economy and its impact on Singapore.

Discussion

China's economy has been slowing down. There are many experts that have said the same and they are right. There are a number of reasons for this slowing down; however, the main are the changes in the policies of the country and its impact on the economy of the country. The country's economy is slowing down and has impacted the international market, as well. The multinational companies in China are the ones that are impacted the most (www.guardian.co.uk). The sales of Chinese goods has slowed down which is the major contributor to the slow growth of the economy.

Interest rates in the country have been reduced for the first time since 2008. The borrowing costs in the country were reduced and the deposit rates and lending of the banks was not controlled in a manner as it was used to. The policy analysts say that this step has been taken to reduce the impact of the debt crisis of Europe on the global market. According to the People's bank of China, the one year lending rate decreased to 6.31 percent and the one year deposit rate decreased to 3.25 percent (www.bloomberg.com).

Inflation is another major problem that has caused the economy of the country to slow down. This has caused the demand for the Chinese goods to decline and has also caused negative impact on the minds of the people. It is important for the people to keep in mind the reasons behind the country's actions. The experts were not anticipating a cut in the interest rates so soon. When the announcement was made by the Central Bank of China, the analysts and experts were surprised. They did not expect the required reserve ratio to be reduced so soon.

The impact of exchange rate on the Chinese economy is also huge. China is the largest exporter in the world and the biggest purchaser of foreign assets that impact the foreign financial conditions (www.channelnewsasia.com). This is the major reason that the exchange rate change has impacted the economy in such a manner. It is important for the country to make sure that the country's economy gets on the right track or else, it will have to proceed with the reduction in the exchange rate. When the economy of the ...