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China's economic slowdown

The cracks in China’s economy appear to be widening. Recently Apple said slowing sales in China meant it would not meet sales expectations, triggering sharp falls on global stock markets. Statistics for 2013 indicate that China’s economy, the world’s second largest economy, has reached its lowest level in the past 14 years. The growth of 7.7 percent of China’s gross domestic product, the slowest growth of the country’s economy since 1999, is reported by the BBC. However, the government surpassed the government’s expectations of 7.5 percent for 2013. Recent statistics show that Chinese politicians face a serious challenge to keep pace with the country’s economic growth. Many analysts expect China to slow its economic growth as Beijing moves from a capitalist-driven economy to a domestic-based model. Read this article about China’s economic slowdown.

 

China’s economic slowdown

No one knows why China’s economic growth may be slowing, or, given the unreliability of official statistics from Beijing, how much. China’s central bank said it was cutting the amount of cash that banks have to hold as reserves for the fifth time in a year. If China is really indeed entering an economic winter, then the chill will spread around the globe.

 

What shape is China’s economy in?

China’s economic slowdown: The latest batch of economic news suggests this slowdown is deepening, not helped by the trade war with the US. A breakneck pace compared with anything in the developed world but about half the rate the country had been racking up for more than 20 years. China’s economic growth has been slowing in recent years and is now running at 6.5% annually. Firms have reported softer demand despite some discounting. New orders have fallen and retail sales eased.

President Xi Jinping agreed to discuss key U.S. concerns in return for Trump’s postponement until March 1 of a new round of tariffs on an additional $200 billion worth of Chinese goods. For Mr. Trump, imposing pain on China — or at least threatening to do so — is all a part of the plan to force that country to reduce its trade deficit with the United States. The truce and the booming U.S. economy and strong dollar, Chinese exports to the United States have not actually decreased in recent months, contrary to Trump’s intentions.

 

Concerned about the future

China’s economic slowdown: The general uncertainty about the future of the Chinese economy has affected the consumer market by a billion and 400 million people, contrary to the wishes of the government. Even if China’s economic officials can turn the predicted economic growth into reality by keeping the flow of investment up to date, trade-related concerns with the United States appear likely to keep consumers worried. According to the end of the uptrend, the Chinese consumer confidence index is likely to continue to drive savings and risk aversion in the coming months. Official reports show that Chinese households have lost their positive attitude to increasing consumption, despite increasing their income levels in recent months.

 

China's economic slowdown

Why does China’s slowdown matter?

At the turn of the century, China accounted for about 7% of global economic activity. Mr. Magnus says fears shouldn’t be overstated: “I don’t think anyone is thinking at the moment that China’s economy is about to fall off a precipice, it’s just that everything has come off considerably from elevated levels it has been at for the last decade or more.” Mr. Magnus says that China’s economy is now so large it pretty much determines the global price of a huge range of products.

 

 

Reducing market returns

China’s economic slowdown: Comparison of Chinese consumption, investment and savings trends since 2016 has only shown the growth trend of saving. The fall in stock markets and the drop in industrial growth since the beginning of this year have boosted the rate of lower returns with lower risk, to the extent that the Chinese have benefited from bank deposits. For example, Yu’E Bao’s returns at 4% at the beginning of the year now have an average yield of 2.8% and have left the competition for its alternatives and even bank deposits.

 

Return of the dollar to 96 units

The dollar’s backdrop has partly offset its autumn fall, supported by positive economic data released in recent days. Although the impact of the economic reports will be temporary, the Federal Reserve’s plan to continue the gradual increase in interest rates will be another weight against the gold yield, which will have a short-term impact. The high-interest rates in the United States, due to the dependence of gold pricing in dollars, make the ounce yieldless. At the same time, the zero yields of the yellow metal will increase the cost of buying and maintaining it for investors outside of the United States (other currencies). Hence, less capital will be diverted to the precious metal market, and alternative markets will take gold.

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