China’s Slowdown Has a Global Impact

1. Which negative effects and in which countries will China’s slowdown cause?

The fact that economic growth in China, the world’s second-biggest economy after U.S. has been slowing since 2007’s peak has made impact on the rest of the world.
There are various negative effects due to slowdown such as lower energy and raw materials prices for the rest of the world.

Maruli Sitorus, a palm oil plantation owner has stated that his income has been halved over the past years as prices for palm oil-used in cooking oil and fuels-have slipped. He refers this slip to the weak demand from China.
However, China’s objective is to reshape its economy to be less reliant on construction and heavy industry, and more reliant on consumer spending.
Mr. Sitorus, had to cut the number of workers on his 25-hectare farm from 12 to 6 and put off fertilizing his fields and fixing his trucks.

Another example of negative effects of China’s slowdown took place in Australia. Anthony Walsh, managing director for Ausco Modular, an Australian company that builds temporary camps for mine workers in Karratha, a mining town on Australia’s northwest coast.
He has stated that a fifth of rooms once occupied by miners flown in from Australia’s east are empty, rents went down by 20%. Due to the fall, unemployment rate in Australia, a mining powerhouse is 5.7%, it’s highest in 4 years.

While China’s slowdown hurts places like Australia, it also means low energy and raw materials for the rest of the world.

A more serious decline in China’s growth rate would reverberate around the world. On risk is that Chinese firms, which are reluctant to lay off workers, would be forces to cut staff, hurting spending at home and undercutting the goal of shifting toward a consumer-driven economy.

2. Which business opportunities does China still offer in spite of its slowdown? Why?

As mentioned above, China is hoping to reshape its economy to be less reliant on construction and heavy industry, and more reliant on consumer spending. This is sparking optimism among industries such as car makers and food producers.

SK Group of South Korea has signed a contract to establish an electric-car-battery joint venture in Bejing. Jung-min Yoo, company’s spokesman claimed that most of company’s China projects are targeting consumers in China, not re-exports to other countries. This is the opportunity, which will contribute to the China’s new growth model.
Furthermore, makers of consumer goods-home appliances, clothing, food and the like-and companies that sell sophisticated equipment to businesses are more focused on China’s increasingly prosperous population of shoppers.

For example, company producing industrial knives used in machines such as paper cutters, Dienes Group has tripled their sales from 10 years ago to around 3 million euros. China npw accounts for as much as 8% of Dienes Group’s 40 million euros in revenue.
The owner of the company Bernd Supe-Dienes has stated that unless China’s economy doesn’t completely fall apart, it will increase per capita GDP and create more demand, and therefore business opportunities.

In South Africa, demand for chromium and manganese is down, but the officials of the Agri SA company hope that rising demand for food will offset that.

3. If you were an Italian pasta producer, would you consider entering the Chinese market? Why?

As I have mentioned by answering previous question, makers of consumer goods such as home appliances, clothing, food and alike, also companies that sell sophisticated equipment to business are more focused on China’s increasingly prosperous population of shoppers.

Moreover, China is trying to pull of rebalancing, by reshaping its economy in order to create a less reliant on construction and heavy industry, and more reliant on consumer spending.

According to the info from the above, if I were an Italian pasta producer I would decide to enter the China market, as there is an expected increase in food demand and consumer spending.