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For the past few years, china has been playing a bigger role in world economy. In last 70 years china has increased its manufacturing and infrastructure facilities to boost its economy. Current Corona virus health situation arose in china has been doing rounds in various economic forms that how it will impact on world economy.  To understand the effects of Chinese slowdown’s global impact, we will go through world economy, china’s contribution toward it and the present situation and containment of it.

World economy at a Glance

The economic strength of any country is decided by the market value of all final goods and services from a nation in a given year. According to the International monetary fund as of today, the world economy stands at  $  87,265,226 Million for 185 contributing economies.

Top 20 economies contribute more than 70 % of total world GDP whereas rest 165 countries contributed for merely 20 % of total the total gross domestic product of the world economy.

Top 20 Economies and its GDP contribution 2019

S.N Name of Country GDP In Million USD
1
    United States
   21,439,453.00
2
 China
   14,140,163.00
3
 Japan
     5,154,475.00
4
 Germany
     3,863,344.00
5
 India
     2,935,570.00
6
 United Kingdom
     2,743,586.00
7
 France
     2,707,074.00
8
 Italy
     1,988,636.00
9
 Brazil
     1,847,020.00
10
 Canada
     1,730,914.00
11
 Russia[n 3]
     1,637,892.00
12
 Korea, South
     1,629,532.00
13
 Spain
     1,397,870.00
14
 Australia
     1,376,255.00
15
 Mexico
     1,274,175.00
16
 Indonesia
     1,111,713.00
17
 Netherlands
        902,355.00
18
 Saudi Arabia
        779,289.00
19
 Turkey
        743,708.00
20
  Switzerland
        715,360.00

One very interesting fact about the top 20 list is that since 1980s 17 countries are consistently placing themselves in this list which implies that it is very hard to replace a top contributing economy by new entrants. China is second in this list for quite some time.

China’s contribution to world GDP:-

According to IMF’s 2019 global economic report, China is the second-largest economy in the world. it has ranked first in terms of contribution to global economic growth since 2006, becoming the leading engine of world economic growth

Since 2012 china has increased its contribution in the world economy from 15.26% to 19.24%  in year 2019 based on a report published in IMF and World Economic Forum.

China’s GDP growth in comparison of world GDP

China’s trade contribution to the world trade

China has embraced the world with open arms, made a significant contribution to promoting international trade and increasing global well being, and has become a key driver for the world economy. China’s imports accounted for 11.37 % of the world total merchandise import  and its exports 13.47  % in 2018.

The Belt and Road Initiative started by China in 2013 plays an important role in promoting in-depth cooperation and common development between countries and regions.

World’s top 3 Trader Economies

Above list shows top 3 world traders and their % contribution in world trade, China has emerged as a top trader in overall performance its import is less than exports so there is trade surplus for china which shows its global proves in terms of trade.

Most of trade pundits generally predicted that increased exports means more reliance over other countries for trade income but in china’s case its different. Domestic consumption contributed to more than 60% of China’s growth  from January 2015 to December 2018. that means that china has been reducing its reliance on trade as a source of growth whereas world has become more exposed to china for its increased dependency on China for goods.

Countries are either trading more goods with China or receiving  investments from Beijing. This increased exposure of the world to china  reflects china’s growing dominance over global trade.

Current situation of China

International retailers chains have closed  their operations in China, several overseas airlines have stopped flights to China and international hotel chains have been offering refunds. The Epicenter of corona virus epidemic (Wuhan)  China’s major trade areas is under lock down for several days which has created problems for  the manufacturers selling goods abroad, buyers becoming more reluctant to trade from China.

Financial markets have also felt the jolt of this  health crisis. Stock markets around the world are lower than they were a month ago. China’s market fell  almost 10% in last week . There has been a particularly marked impact on the prices of industrial commodities, as China is such an important buyer.

Crude oil hit its lowest level in more than a year. It has dropped by about 15% in the past two weeks, reflecting declining demand from China, OPAC is considering production cuts in an effort to reverse the price fall.

China’s corona virus crisis is not only confined to china but whole world exposed to it in terms of trade and share markets.

What lies in China’s  economic future and how it will effect the whole world

It will be jumping on the gun to quantify economic effect of corona virus , much will depend on how china is dealing with current damage and contain.  China’s growth prediction has come down to 3% from 5.6  which will affect global economy by .2%  at present with a positive consideration that china will contain the situation successfully.

In case China lags behind in damage control there is a risk of the economic damage turning out to be more severe as expected.

To know more about corona virus epidemic please read our Article  on Corona Virus

 

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