China s Effect On The Global Economy - 1285 Words

RaghuRam Prasad Ms. Wienkes English 9 Accelerated 7 April 2016 China s Effect on the Global Economy Over the last two decades, what was once a developing country has grown into the economic superpower that is China. China passed Japan to become the world’s second-biggest economy in terms of GDP in the second quarter of 2010 and was said to be on track to surpass the United States in 2027, with an annual GDP of $14 trillion (Bloomberg). Since China became a larger and more influential country, it is now important to realize that the global economy depends heavily on China’s actions. Their exports have lowered consumer prices across the board, and their imports have impacted commodity prices. However, in recent times, China’s economy has†¦show more content†¦Plus, trade makes up 10% of Chile’s economy. If China’s economy suddenly slows down or even falls, countries like Chile are going to be hit very hard. Direct trading partners with China aren’t the only ones that will be hit, however. Individual companies like John Deere are also affected. Almost 40% of John Deere’s sales are overseas. They have reported that their sales in South America have gone down. Coincidentally, some countries in South America have China as their main trading partner. If those countries cannot export their goods, they cannot make money. Without money, they can’t import goods from other countries. In the end, John Deere cannot sell their equipment to Chile since Chile can’t sell their goods to China. This is called a domino effect. Another example would be the Standard and Poor (SP) 500 index. Even though only 2% of SP 500 revenues come from China, 44% of SP 500 revenues come from outside the US in total. Those revenues come from other countries who have a larger trade relationship with China. If they can’t trade with China, then those countries can’t pump money into the SP 500, ultimately causing an effect in the United States (Gillespie). For China to be a major exporter, they have to obtain vast amounts of materials to produce those goods. In fact, China is one of the biggest importers of both goods and commercial services. If China’s economy starts to slide, they can’t import as much goods and services. Many