The once economic Goliath is finally admitting that it is currently facing a financial dilemma. China has recently announced that its economy is slowing down, something that has not happened in almost three decades.
China has one of the largest economies in the world and it is now showing signs of weakness. Just over a year ago, it posted growth of 6.4%, but lately, it is slowing compared to the previous quarter’s levels at 6.5%. This is quite similar to the levels seen when the worldwide financial crisis hit in the early months of 2009.
This announcement is now starting to worry local businesses. With a slowing economy, Chinese companies may begin to think of cutting their manufacturing costs which may result in many workers losing their jobs.
The slowing progress was felt by Chinese lawmakers as early as last year. Policymakers have promised support to stabilize the economy and to prevent the possible job losses that may happen in case worse becomes worst.
Potential worldwide effects
Consider that most of China’s economy is from its manufacturing industry with major companies and businesses all over the world relying on their goods and services. Laying off people can cause delays on orders, loss of profits and increased customer dissatisfaction. Companies that have links with China can end up losing profits too unless something is done fast.
Conditions could get ugly, any stimulus measure to augment China’s slowing economy is predicted to take time to take effect. Analysts agree that the situation in China is going to become worse before the country sees any improvement. The slowdown can even slump down 6.3 percent, and analysts also think that the data is already much lower than what is publicized.
It is tough to determine what the real numbers are with different contradicting trade data information and factory activity results in the past months. Analysts have noticed that the country’s GDP results seem to be unrealistically steady and this led to investors relying on relevant trends rather than focus on unlikely and inaccurate readings.
Data gathered in December has shown that the economy slowed rather quickly as expected towards the end of the year. The country was already in dangerous grounds by the time it entered 2019. There is also news that the nation’s capital was deciding on lowering its growth target down to 6% coming from 6.5% in 2018.
China’s Current Economic Situation
Because of reduced consumer spending and weak economic expansion, new investments are unlikely to happen soon. Possible job losses are likely as some factors, especially in Guangdong, are now feeling the heat.
Some manufacturing plants have no other choice but to shut down as early as before the Lunar New Year holidays as the negative relations between China and the US continue to delay orders. There are also companies starting to cut down on manufacturing hours to ease production costs. If this situation between China and the United States worsen, workers won’t have anything come back to after the holidays.
Trade negotiations between the US and China will reach an early deadline by March. Washington has even threatened China that it will continue to hike tariffs should there be no positive changes in China’s part.
China hopes that its stimulus steps will soon bear fruit. Lawmakers have even supported projects as well as reduced import duties and taxes to improve the current demand. Economists also think that China may make 2 trillion yuan or $295.13 billion worth of cuts when it comes to penalties and taxes in 2019.
The country may also provide 2 trillion yuan more in bonds to be utilized to jumpstart important economic projects. Watchers say that it could take until summer for China’s economy to bounce back.