Investors are facing financial crisis as a panic selling spread around the globe. (Photo : Reuters)
Investors are facing financial crisis as a panic selling spread around the globe. Total loss accumulated to trillions of dollars, and, just like before, the blame has been put on China as an effort to hide the genuine reasons.
There is no doubt that China's economy slowed down in the past few years. Certainly, it might have left some negative impact on the world economy, as it is the second biggest economy of the globe; however, this does not prove that the panic selling spread across the globe is the result of the fall in China's economy. Even the fall in price of oil has been attributed to China's falling economy, and this is not a right observation.
Despite a falling economy, China's oil consumption registered a growth of 2.5 percent last year. Although there is an estimated fall in the growth this year, it will not fell down further. Actual reason behind the fall in price of oil is a commercial and geopolitical war fought between Saudi Arabia and the U. S. Saudi has flooded the market with barrels of oil to outsmart American companies which resulted to low oil price. This low oil price hit the junk bond market of America.
Secondly, many banks have provided high amounts of loans to several American drilling companies when the oil price was high. Now, those debts are going bad very fast, and this reality creates havoc in the market.
Besides all these, the report of IMF on Chinese economy clearly predicts a growth of 6.3 percent this year. This clearly shows that, though with a slow pace, Chinese economy is still growing. These facts clearly show the need to understand the core of the problem and to take the necessary measures, instead of blaming China for no fault of theirs.
(Disclaimer: Views and opinions expressed in this article are those of the author and not necessarily those of Yibada.)
