Exploring the Economic Outlook of China and Asia

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China’s Economy Stumbles, But For How Long?

Following decades of unprecedented economic growth, China has enjoyed formidable growth and influence. However, recent signals reveal a series of setbacks, casting shadows on an anticipated economic resurgence. 

While China’s prospects may be dampened, Asia is still poised to be a rising force in global politics. The entire world is watching closely as the East aims to take a bigger slice of the pie in the near future.

Short Term Red Flags for the Red Dragon

China is looking to bounce back from their extreme methods of dealing with the coronavirus pandemic. However, recovery is significantly slower and, in some places, virtually non-existent. This is due to numerous factors; some external and some of their own design.

The first red flag, as noted by Visual Capitalist, is GDP growth. Previously averaging 9% annual growth over the past four decades, GDP expanded by a minuscule 0.8% during Q2. This was down from the already low 2.2% in Q1. Exports have diminished for several months in a row, an unsurprising result of a tight global economy created by inflation and slowed consumer spending. There is always hope for a strong end of year performance brought on by the holiday season. A miracle Q4 that could pump fresh life into the Chinese economy seems more unlikely by the day.

As always, with China, it is worth noting the cloudiness that surrounds numbers coming out of the Middle Kingdom. In June, youth unemployment (ages 16-24) hit a record high of 21.3%. Though there is no evidence, it can be presumed that that number has risen even further as the Chinese government has suspended reporting of this data under the guise of re-evaluating their collection methods.

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Red flags for China's economy Visual Capitalist
The Global Economy predictions for 2050
The Global Economy Predictions for 2050

Positive Indicators for Future Growth in Asia

The global markets are reacting quickly to China’s misfortunes. The yuan conversion rate to the U.S. dollar reached a 16-year-low in August. This is surprising to some economists who recently theorized that BRICS currency could rise to threaten the dollar. While China is still projected to outpace the United States, they will not be leading the charge in speed of GDP growth. That honor will lie with India, the world’s most populous country and one that is expected to climb the global rankings to third largest GDP by 2050.

There is significant optimism surrounding the future of India. Fears of a recession have rescinded slightly since the start of the year and, despite economic uncertainty and rising oil prices, the Indian economy is expected to steadily rise in both the short- and long-term. While not emerging as a dominant force, India grew by 6.1% last quarter. When compared to China’s sluggish growth, mentioned earlier, it is easy to see why there is confidence in India.

India’s demographics also give economists confidence. The median age in India is 28 years, versus 38 in the United States and 39 in China. Other countries, like Bangladesh and the Philippines, have lower median ages, indicating a larger workforce for years to come. 

How Will This Affect the United States?

There are many in the United States that will breathe a sigh of relief at these numbers. While it is a virtual lock that China will surpass the United States, in terms of GDP, this may not happen until 2040 and some forecasts report it may never come to pass. At the very least, China’s influence has diminished and the current economic situation is a major setback for a country that was on the verge of becoming the leading world power.

The United States and other Group of Seven nations look to maintain their influence when it comes to the negotiating table. This is also welcome news to companies like Apple and Tesla, who operate large factories and production centers in China.

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