The document discusses the composition of China's GDP and the challenges it faces, including a declining effective working population and rising total debt, which have hindered growth despite previous successes. It outlines the impact of China's economic slowdown on various countries, particularly those heavily reliant on Chinese imports, like Australia, Japan, South Korea, and several sub-Saharan African nations. The document concludes by emphasizing the need for China to rebalance its economy and reform business practices, although these changes will take significant time and effort.

2. Presented by : SHOBHIT WADHWA
MBA-IB(3RD SEM)

3. Agriculture: 9.2%
Industry: 42.6%
Services: 48.2%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Agriculture Industry Services
Composition of the Chinese GDP
Percentage

4. Large-scale capital investment (financed by large domestic savings and foreign
investment) and rapid productivity growth

9. REASONS OF FAILURE
• The law of large numbers (financial, rather than statistical) applies to nations as well as to companies: the
bigger an economy gets, the harder it is to keep growing at a fast clip. Growth of 7% this year for China
would generate more additional output than a 14% pace did in 2007.
• Effective working population is declining.
• Total debt (including government, household and corporate) has climbed to about 250% of GDP, up 100
percentage points since 2008.
• The fundamental problem is that China has misused debt to grow far faster than income growth prudently
allowed. China’s impulse is to return to practices that have succeeded in the past, so it’s difficult to imagine it
abandoning the three pillars of its past growth strategy: exports, business credit growth, and infrastructure
spending.
• China will likely consider other growth channels: increasing consumer credit growth; ramping up other
categories of government spending such as military spending; encouraging continued migration of rural
populations to the cities.

10. EFFECT ON OTHER COUNTRIES
• AUSTRALIA
• More than 30 percent of Australia’s exports are consumed by China. These exports include iron ore, coal,
coal briquettes, copper, nickel, cereals, meat, wool, fur skins and hides; they could suffer as a result of
the slowdown. With the global recovery still very slow, Australia may find it difficult to discover new
markets for its increasing exports. Export prices of some of its commodities are already being impacted
by the slowdown.
• As of late April this year, Australia has entered into trade treaties with Japan and South Korea in an effort
to overcome the impact of China’s slowdown.
• Japan and South Korea
• Japan exports primarily electronic equipment, machinery, pumps, medical electronic equipment,
automobiles, chemicals, plastics, copper, steel and ferrous products to China. This amounts to 8 percent
of China’s imports and 20 percent of Japan’s overall exports.
• South Korea’s dependence on China amounts to approximately 29 percent of its export trade. Exports
comprise electronic goods and components, medical and surgical equipment, mechanical equipment,
engines, chemicals, oils, auto parts and products, steel products and copper.

11. EFFECTS(CONTD.)
• AFRICAN DISTRESS
• The Chinese slowdown has the potential to damage the economies of Sub-Saharan countries, which are
showing signs of growth on the strength of demand for minerals and other natural resources,
predominantly from China.
• Commodity prices for goods such as copper and iron ore are already under strain, while coffee and cocoa
prices will not be affected, as Chinese demand continues to grow strongly for these products.
• Ghana, Uganda and Rwanda are also benefiting from firm coffee and cocoa prices. The outlook for ores
of iron and copper are not as encouraging as industrial production is not growing at the previous rate.
• Brazil
• Brazil exports iron ore, copper, slag, wood pulp, sugar, rawhides, animal fats, meats. Industrial-input
materials such as copper and iron ores are likely to face a downturn. Exports to China constitute 19
percent of its total.

12. • SOUTHEAST ASIA
• For Thailand, exports consist of machinery, electronics, fruits, nuts, vegetables, wood, rubber. Even
though these account for only 2 percent of China’s imports, they are critical for Thailand’s economy.
Similarly, Indonesia exports primarily oil, minerals, rubber, wood, pulp, animal fats and electronic
equipment, and may be moderately affected by the downturn.
• Malaysia’s exports to China account for 15 percent of its export economy. They consist mainly of oil,
electronic-integrated circuits and palm oil. Singapore’s exports make up 1.5 percent of Chinese imports,
and the country has a diversified portfolio.
• THE WORST SUFFERERS
• Countries such as Mauritania, Turkmenistan, Sierra Leone, Gambia, Mongolia, Mali, Solomon Islands,
depend on China to purchase more than 50 percent of their exports. Their economies are much more
vulnerable to the economic growth problems of China than most.
• A slowdown in China would dampen activity in the entire region, because of the size of the Chinese market
and the close trade and investment links. Since it would likely be associated with commodity price declines,
commodity exporters (Indonesia and Mongolia) would suffer a double blow.

13. • OTHER REGIONS
• The US, Canada, the UK and France export aircraft, space equipment, machinery, electronic equipment
and vehicles to China. US exports to China constitute a significant 9 percent of its export trade and 8
percent of total Chinese imports.
• German exports account for 6.5 percent of total German export trade and 4.8 percent of overall Chinese
imports. They comprise engines, machines, mechanical parts, pumps, automobiles, electronic and
medical equipment, pharmaceuticals, spacecraft, copper, ferrous and steel products, chemicals. Along
with Germany, Switzerland, too, is a major European exporter of machinery and equipment to China. Its
exports constitute 3 percent of Chinese imports. Both Germany and Switzerland will be moderately
impacted by China’s slowdown.
• The UK’s exports to China comprise spacecraft vehicles as well as mechanical, electronic and medical
equipment.
• Chinese imports from Russia and Saudi Arabia comprise mainly oil, and they won’t be affected by the
slowdown.
• While the UK and some nations of Western Europe are optimistic about their own economic recoveries,
the eurozone and the rest of the world have yet to share their optimism. The inevitable slowdown of
China is a negative factor for most countries of the world, and only a faster pace of recovery in Europe
and the US will play a stabilizing role.

14. IMPACT ON INDIA
• Commodities
• Automobile Producers
• Oil
• Indian exports
• Good investment opportunity
• Any global slowdown can have an impact on India’s growth.

15. REBALANCING AND REFORM
• Rebalancing is needed—China’s growth has been far too dependent
on investment by its businesses as compared to consumption by its
households. But rebalancing is hard work that will take years, not
quickly enough to reverse China’s decelerating growth.
• Reform of business practices is needed as well, but that too will be
very difficult, and likely won’t happen fast enough.