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The coming depression blog | February 16, 2019

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Money crisis of China and the potential disasters that may follow discussed

Money crisis of China and the potential disasters that may follow discussed

China is a country that has grown massively over a period of thirty years. It is said that china indicates the world’s second biggest economy. Since 2001, the main competitor for China has been the United States. Till date, the scenario remains the same. The competition is mainly in the field of finance. The beauty is that these two countries actually co-exist in an appreciable way. Both the countries use each other for their mutual growth. In spite of this symbiosis, their relationship had been strained since the global financial crisis. It is important they face these financial problems with efficiency since the economic growth of both these countries depends on it.

Ensuing disaster in the country
This would mean that China may increase the interest rate in banks to cope up with its instability and thus avoid inflation in the country. If inflation is not avoided, all of the local people’s life savings would be burnt along with the country’s financial demise. Situation in the entire country would become a disaster as the price of all basic items would go up several times than normal. Since the financial markets of all the countries are more or less linked, one cannot go wrong without pulling down the others along with it.
Changes in stock market
In case of inflation, the stock market would fall by several percentages thus reducing the demand in commodity market of China. The overseas demand for raw materials from this country would also go down thus increasing the extent of inflation. Investors would be affected because of the down trend. If the investors had borrowed heavily, then their entire life may be at stake. When a noticeable rise is seen in the trend of a stock market, the situation will be stable only if there are enough fundamentals behind it. The rise should not happen based purely on momentum which may ultimately lead to disasters.
Analysing the core of the problem
It is important that the country takes immediate steps to bring about changes in trading infrastructure to achieve stabilization in the long run. It is time for the government to sit down and analyse the core of their economy. This should be followed by bringing in movements that would help the country face the storm. The country is well known for its excellent leadership. It is also known for its compassion. Hence situations like this would be handled brilliantly by the government to ensure welfare of the people.

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