Economic Slowdown in China: Relevance
- GS 2: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
Economic Slowdown in China: Context
- China GDP 2021 third-quarter slowed to 4.9% as industrial production was much lower than expected, in September this year.
Economic Slowdown in China: Key points
- The main reason for lower growth in China economy 2021 was slowdown of industrial growth that rose at 3.1% against the expected 4-4.5%.
- The recent GDP projection offer indications that businesses were less keen to invest in new projects.
5 reasons China economy is slowing down
- Surge in coal prices led to electricity shortage that prompted provincial governments to cut power supplies.
- It led to reduction in output across the country’s industrial heartland in its south east.
Real estate turmoil
- Real estate accounts for about a quarter of China’s GDP.
- Thus, slowdown in real estate investments has led to drop in fixed asset investment.
- It is thus leading to increase in default and subsequently missed payments to investors in its offshore US dollar-denominated debt.
- There are also concerns about its possible cascading impact on other sectors.
- There is a souring of business sentiment amid the federal government’s crackdown on multiple Chinese sectors that have been mascots of growth over the years.
- Reasons like slowdown in residential construction since 2013, excess capacity in some key industrial sectors, and the rapid rise of unregulated shadow banking loans between 2010 and 2014 is further deepening the crisis.
- Unresolved territorial disputes like in South China Sea dispute and the Senkaku island dispute is resulting in political and military tensions, and has repercussions over economic issues as well.
Economic Slowdown in China: Impact on India
- India’s imports from China rose to $68.5 billion in the first nine month of 2021, up 52 per cent from the corresponding period in 2020.
- It means that the immediate impact on Indian economy would be negative as we have a huge trade deficit with China.
- The most impacted segments would be smartphones and automobile components, telecom equipment, active pharmaceutical ingredients, and other chemicals.
- On a flip side, however, the slowdown in China could be used by our country and make India a manufacturing hub by incentivising the companies.
- Schemes like Production Liked Incentive , PLI scheme for textiles., PM Gati Shakti Master Plan, PM MITRA Scheme, India Export Initiative, Medical Devices Park Scheme are in right direction.