The Financial Crisis and Its Impact on China Research Paper

The Financial Crisis and Its Impact on China - Research Paper Example Chinese economy has never depended upon the risky Western financial measures. They rather treasure their deposits. In spite of this secured state, Chinese economy suffered fluctuations The global financial crisis has started shaking the Chinese economy as the ripple effect from American economy has worsened the already falling Chinese markets. Worldwide demand for their exports has been reduced. This resulted in the stopping of domestic industrial production. Factories have been closed and the employees lay off that led to unemployment and protests. Towards the end of 2008 they announced a $586 billion stimulus package targeted towards bettering growth and domestic consumption in ten different sectors of Chinese society. Infrastructure investment, disaster reconstruction, environmental safety measures are some of the sectors that have been touched. The package is expected to help iron and steel sectors, cement producers and certain other industries through the investment put on infra structure. The new step also improved growth by taking off loan quotas on lenders and raising credit for different projects that support rural areas and small scale businesses. Government has recognized the sectors where they really felt decline and announced packages that can bring up the economy. They have made reduction in interest rates and devoted funds for infrastructure construction. Steps have also been taken to improve real estate sales. China has also announced heavy rebates on taxes put on exporters. In the third quarter of the year 2008 the growth rate was just nine percent. This is the slowest rate the nation has witnessed in the last five years. China has also faced a consecutive fall in housing prices. Other industrial sectors like textiles, information technology and electricity production have also encountered decline. China is not heavily affected by the financial crisis like other countries because of its closed financial system. They are however affected by the f inancial crisis in innumerable ways. Other countries that have been fallen because of crisis urge China to extend a financial help hand by raising its own exports. A small slowdown in the financial growth rate of China is expected to bring big results. Certain economics have warned that China will encounter a serious recession even if its growth rate falls slightly below six percent. Chinese should keep at least nine percent growth rate to maintain its growing labor force and take farmers to the urban sectors. The international financial crisis has wounded different aspects of Chinese economy even though the actual impact is not completely visible in the year on year comparison. The most visible impact of the crisis is the loss seen in export-oriented light industry in China. Thousands of companies have fallen; thousands of workers have lost their jobs. According to the official reports more than ten million migrant workers have lost their jobs and returned to their native provinces . Industries in China have been highly affected because of the economic crisis. It has severely affected the equipment manufacturing industry. Chinese government had to introduce equipment manufacturing adjustment and boosting plan for countering the fall. Priority is given to the equipment manufacturing sector. This sector has been upgraded and supported by government. Independent innovation has been encouraged; this