The Effect Of China On The Global Economy

914 Words 4 Pages
CHINA’S AFFECT ON THE GLOBAL ECONOMY
The major topics surrounding the economic world has been the latest news concerning China. The media has been talking about how China’s current economic situation is affecting the global economy. A major question with this global problem is, what was the cause of the recent volatility? One of the reason for this ripple affect on to other markets and active disturbance has been caused by globalization. Currently, Xiao Gang, China’s security regulator has been fired. In 2013, Xiao Gang became the chief of the China Securities Regulatory Commission (CSRC). Under his tenure the Chinese stock market had soared to record highs in 2014, which fed into the market bubble. In 2015, the bubble burst and the Chinese
…show more content…
Debt Even as China Sold, it summarized the current situation and past events that have occurred in the U.S Treasury bond market. This article is relevant because it shows China’s affect on the U.S. Treasury bonds, which sparks massive movement in the global markets. The collapse of the Chinese stock market affected all the Stock Exchanges in the world because of globalization of the markets. The collapse in China led to the following events, in December China sold U.S. government bonds and as a result of this may foreign central banks absorbed these bonds. China is the biggest foreign owner of U.S. Treasury debt and in December they cut $18.4 billion of U.S. government debt, according to the latest capital flows report from the U.S Treasury. The article continues and identifies Japan as the second largest foreign owner of Treasury debt. They also sold 22 billion U.S Treasury …show more content…
This problem has caused the downfall of all the major Stock Exchanges and the sell off of U.S. Treasury bonds to try and correct the problem. The international implications of this problem are caused by the globalization of the markets. Essentially, the major stock exchanges are all intergraded and when on sees massive losses it affects others. A major problem the United States faces is losing control of regulating its interest rate. As previously stated, China owns the majority of U.S. Treasury bonds and a major crash in the Chinese stock market would heavily prompt the Chinese government to start selling these securities to reduce its own debt, which they did. This would have triggered the U.S. dollar to drop instantaneously and force the Federal Reserve to hike up the interest rate to lessen such an effect. Luckily, as China was selling off their shares other countries and private investors bought up these securities. This helped stabilize the market and allow China to improve their situation. Globalization has both caused and assisted the current problem in the global

Related Documents