30%. After a modest recovery, stocks took another hit in August. Financial experts have

warned that China’s economic downturn could lead to an global recession. So just how dependent

is the world economy on China?

Well, for the past three decades, China has seen about 10% economic growth every year

from industrialization and increased worldwide trade. But in recent years, the growing tech

and housing markets have begun to collapse. The results have been devastating for China,

and its trade partners.

Brazil may be one of the worst hit. Just a decade ago, the country had miraculously strengthened

its economy by striking landmark trade deals with China. As Brazil’s top trading partner,

China bought primarily iron ore and oil, as well as beef and sugar. But as China’s demand

for imports drastically decreased, Brazil fell into a financial crisis. In August, the

government confirmed a national recession.

China’s other top trading partners, Australia and Japan, are also feeling the squeeze. Due

to China’s shrinking demand for auto exports, Japan is experiencing a continued economic

slump. China’s construction sector is also on the decline, leading to less trade with

Australia, a significant source of raw materials. As a result, economists have warned of Australia’s

first recession in 24 years.

In late August, fear over the Chinese economic downturn caused the US Dow Jones to plunge

nearly 600 points, resulting in its worst day since 2011. International stocks also

slumped after China’s stock market fall. Asian markets especially suffered major losses.

In an effort to reverse the recession, the People’s Bank of China cut interest rates

to record lows, and brokers are being prosecuted for spreading negative rumors about the stock

market. Additionally, China devalued its currency by about 2%, cheapening the cost of exports,

and thereby encourage its manufacturing sector.

Ultimately, if China’s economy doesn’t stabilize, it could create a significant ripple

of financial instability throughout the globe. Because so many countries have significant

stock in China’s success, China’s economic health is of vital importance to the rest

of the world.

Besides the slump of its stock market, China has been facing other problems affecting its

economy. Find out more by clicking on this video. Thanks for watching us on TestTube

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