China’s Slowing Economy

In 2015 the Chinese economy grew just 6.9%, almost half a percent less than 2014, and has an expected growth rate of 6.3% andthe light trails on the modern building background in shanghai china.6% for 2016 and 2017 respectively. After an incredible growth of expansion, the slowing has been painful to the Chinese job market and ramifications can be felt throughout the world economy. Though China seeks investors to support further growth they also move away from a state run investment and manufacturing economy to depend on services and consumer products. For the US labor market, the fallout is complicated at best.

China grew to be the world’s most important consumer of iron ore, lead, steel, zinc, copper and many other industrial or investment commodities. This slowdown has already further deflated the price of gas in the US and the steel iStock_000075418925_Largeindustry is following. Before China integrated into the global economy, the US accounted for nearly a quarter of world GDP. China is slowing from a nearly 10% growth rate that it reported in the first three decades of its reform period, starting in 1980, to around a more sustainable 7% and the global economy will slow with it. The main areas where the impact will be felt would include not only commodities, but also consumer goods, including luxury goods. The slowdown will deflate prices of luxury items. China and non-Japan Asia account for 20-30% of all luxury sales, including Prada, Harry Winston, Burberry, and Omega.

China’s re-balancing of its economy means that consumption (what consumers buy) will become a bigger part of the domestic economy than investment, and services will become a more important driver of growth than manufacturing. As a result, a Chinese slowdown will affect not just commodities and capital goods, but also global consumer demand and thus the profits of multinational companies in America and Europe. New manufacturing markets will need to be found to supply the cheaper consumer goods and the Chinese demand for services will, likely, help support its economy as they make the shift
away from manufacturing. Our US jobs, especially those in logistics remain strong, but weary, watchful of the global markets in a way that few industries have to be.
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