The 2008 Recession

6 Feb

The 2008 recession had dramatic impact upon the ‘global west’, but had a much less distinctive effect on China. Since the recession, China has excelled, increasing output, economic growth, and employment, but is this coming to an end? China’s economy is considerably slowing down, experiencing unexpected economic difficulties. Global investors are becoming unnerved, real estate prices are dropping, and even manufacturing isn’t showing positive signs. China’s export growth has plunged to barely above zero, and Chinese stocks have taken an intense turn for the worse, becoming available at cheap prices. The economy was 8.1% larger in the first quarter of this year than a year earlier, but most of that growth took place last year, showing the concern for the Chinese economy in global markets.

 

There is speculation that China will hit the ‘next big recession’. However, unlike the west, China has the potential to stop it before it becomes too severe. The real estate market is already in decline, but should investment endure, then there is potential to save China’s markets. Furthermore, there is further evidence suggesting China is already in a recession, but is more resilient than the west, showing potential for survival. 

 

Should China continue to deepen into a recession, then there is potential for severe consequences globally, seeing as it remains the largest importer of consumer goods, iron ore and copper.

                                                                                        

Sources:

After barreling ahead in recession, China finally slows : http://www.nytimes.com/2012/05/25/business/global/chinas-once-hot-economy-is-turning-cold.html?pagewanted=all&_r=0

 

Global slowdown predicted after deluge of bad economic data:  http://www.guardian.co.uk/business/2012/sep/20/global-slowdown-predicted

 

Is China in a recession?: http://www.forbes.com/sites/investor/2012/05/23/is-china-in-a-recession/

China can’t hide the recession any longer: http://www.forbes.com/sites/investor/2012/10/16/china-cant-hide-the-recession-any-longer/

By Josh McDonald

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4 Responses to “The 2008 Recession”

  1. de1g11 February 9, 2013 at 1:42 pm #

    What options do China have to prevent a recession occurring. China currently holds the majority of the American nations debt. If this debt is sold off to prevent a Chinese recession then China forces America to be incapable of buying their goods. Other options could be investing heavily in its internal market, but with over 50% of its population being agricultural labourers the returns may not be large enough or rapid enough to work.

  2. iw4g11iw4g11 February 12, 2013 at 11:18 pm #

    Chinas integration in the global Markets as you’ve pointed out have exposed its economy to fluctuations in global demand. This decline in growth can be attributed to the decrease in foreign demand. As China’s financial system is not as complex as the ones seen in the US it has had the power to deal with issues in the financial world more effectively. So the external effects have been subdued. The majority of international trade is conducted by privatised Chinese companies which have reaped the rewards , there is still however a large proportion of domestic trade operated through nationalised “corporations” maybe its time for the business dragons of the international Chinese trade to turn their attention towards the internal domestic market. Does china have the advantage of heinseight on the way financial sectors and their complexity/interdependence , and can it learn from the mistakes and apply them to the relatively young financial sector?

  3. gs15g10 February 13, 2013 at 9:47 am #

    House prices have increased dramatically in China (they have risen 140% from 1998), but especially since the recession where the Chinese government announced a stimulus package of $586 billion which caused a ‘housing bubble’ similar to that seen in the West over the previous decades (prior to the financial crisis). This is obviously very dangerous for Chinas economy, as can be seen in the adverse effects it has had on the Western global economy.
    House prices are kept high by the quota on the amount of agricultural land that has to remain (120 million hectares) – this has led to many peasants being thrown off of their land and the destruction of their farms and subsequently their livelihoods to make way for new skyscrapers of apartments and offices and local facilities such as football stadiums and swimming pools.
    The Chinese government is now faced with a difficult dilemma – do they let house prices continue to increase at this alarming rate and further expand the ‘housing bubble’, as currently the housing boom contributes a higher amount of economic growth than the current export market and the housing market accounting for 13% of total GDP. Or does the government cool off the housing boom and face the potential consequences of economic crisis as the housing market feeds many sectors especially steel and other raw materials. If the government chooses the latter, as the article above states it will have a ripple effect on the rest of the globe as Chinese imports would begin to slowdown as domestic spending decreased.
    Whatever the government decides to do they need to decide quickly because as we have seen previously, the housing bubble isn’t sustainable and will eventually burst!

    Sources:
    As China’s economy slows, real estate bubble looms:
    http://articles.washingtonpost.com/2012-10-02/business/35500560_1_home-prices-real-estate-chinese-home-buyers
    China’s crazy real estate market bubble bursting:
    http://www.ibtimes.com/chinas-crazy-real-estate-market-bubble-bursting-1021560
    mass displacement of the poor in China for Capitalist development:
    http://revolutionaryfrontlines.wordpress.com/2011/10/24/mass-displacement-of-the-poor-in-china-for-capitalist-development/
    China’s housing bubble: its past and its future:
    http://www.forbes.com/sites/kenrapoza/2011/11/08/chinas-housing-bubble-past-and-its-future/

Trackbacks/Pingbacks

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