Essays on The Impact of the Slowdown of the Chinese Economy on Other Economies in Asia and Australasia Case Study

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The paper "The Impact of the Slowdown of the Chinese Economy on Other Economies in Asia and Australasia" is a perfect example of a macro and microeconomics case study.   There are indications that China’ s economy is undergoing a slowdown after thirty years of rapid growth. Following the pro-market reforms of the 1970s, China entered a period of steady growth, which transformed the Asian country from a third world nation into a leading global economic powerhouse. Today, China is very powerful economically and is having a huge impact on the economic growth of other countries in Asia and the world.

Over the years, China has been integrating economically with regional countries such that any economic shocks in China results in quick ripples across the region. Thus, many regional countries are likely to be affected by the decline in China’ s economy. Worse, the ongoing contraction in China’ s economy has happened at a time when most countries are struggling with the effects of the 2010 global credit crises (World Bank, 2015). The objective of this paper is to evaluate the effect of China’ s economic slowdown on regional countries in the Asia-Pacific region.

Specifically, the paper will look at the case of New Zealand, which is one of the regional countries strongly dependent on China for trade and economic growth. It can be noted that China and New Zealand have maintained strong trade relationships since the 1980s. These relationships have been of mutual benefit to both countries such that any slight changes in the economic variables of either country can be felt in the other. The paper is divided into two major parts. The first section gives a background on the level of economic interdependence between China and New Zealand.

This section also gives a brief history of China’ s economic growth. The second part explores the specific impact China’ s economic slowdown is having on New Zealand. Also discussed in this part is the history of China’ s economic slowdown and how it is causing shockwaves in other countries. Because China has the largest and most influential economy in Asia, the case in New Zealand is similar to that in many Asian countries that maintain strong economic relationships with China. Background to the Economic Linkages between China and New Zealand As from 1980, the economy of China has been expanding at an average annual rate of 9.9%.

Its share of the world’ s normal GDP increased from less than 2% in 1990 to 13% in 2013. During this period, the Asian country’ s Gross Domestic Product increased tenfold, making China a top global economy. In terms of international trade, China is the largest exporter in the world, accounting for 11% of the global merchandise exports. Accordingly, Chinese companies have become more integrated with global supply chains.

In addition, China’ s large population accounts for a large share of the world’ s total demand for consumer goods and services (World Bank, 2015). According to ADB (2015), the growth of China’ s economy since 1980 was fuelled by reforms aimed at making the economy market based, a drastic change of labor from basic agriculture-dependent to industrialization, and a substantial increase in physical capital. China’ s accession to the world trade ushered in an era of steady assimilation with international markets, reflecting a desire to foster an export-oriented economy. Resultantly, the level of China’ s trade with regional countries increased considerably.

One of these countries that benefitted significantly from China’ s growth in New Zealand. The Asian country is today the most important trading partner after neighboring Australia, 14% of imports and 20% of exports in 2014. Chinese companies have invested heavily in New Zealand, making China account for 14% of New Zealand’ s foreign direct investment.

References

ADB (2015). Asian Development Outlook Supplement. Accessed 26 September 2016. http://www.adb.org/sites/default/files /publication/161734/ado-supplement-july-2015.pdf

Bowman, S. and Conway, P. (2013). The outlook for China’s growth and its impact on New Zealand exports. New Zealand Treasury Working Paper, 13/16.

Garnaut, R., Cai, F. and Ligang, S. (2015). China: A New Model for Growth and Development. Accessed 26 September 2016, http://press.anu.edu.au/titles/china-update-series/china-a-new-model-forgrowth-and-development/pdf-download/

Kireyev, A. and Leonidov, A. (2016). China’s Imports Slowdown: Spillovers, Spillins, and Spillbacks. IMF Working Paper 16/51.

Osborn, D. and Vehbi, D. (2013). Empirical evidence on growth spillovers from China to New Zealand. New Zealand Treasury Working Paper, 13/17.

Steenkamp, D. (2014). How volatile are New Zealand’s terms of trade? An international comparison. Reserve Bank of New Zealand Bulletin, 77(2).

World Bank (2015). China Economic Update. Accessed 26 September 2016, https://www.worldbank.org/content/dam/Worldbank/document/EAP/China/ceu_06_15_en.pdf

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