The recession in the United States and the increasing debt in the European economy has made more economies panic about the continuing financial crisis happening around the world. Major exporters such as Brazil, India, Russia and China shouldn't even feel safe in an economic crisis such as this one. They will all be largely affected due to the decrease in exports which will create financial stresses in their economies that were once unimaginable. According to the article, “With closely integrated global financial markets and trading networks, financial crises and economic contractions in the developed economies, which still account for nearly 60% of the world’s GDP, will inevitably undermine emerging-market countries’ prosperity.” Europe expects to get relief by letting other countries pay for their debt using foreign reserves. With China having 3.2 trillion in foreign exchange reserves, the European countries are looking to them to come and “save” their economy. The only problem is that China is making huge demands. One of China’s demands are to be granted with “Market Economy” which will mean that companies who have been dumping large amounts of goods in overseas economies will not be accountable for their actions in that nature.
China should consider pulling Europe out of their debt crisis due to the fact that Europe makes up 383 billion dollars of China’s export market. Europe’s recession would mean a slowdown in China’s economy as well. One countries debt is another countries problem as we can see in this article. Just because one economy may be better off financially and hold foreign exchange reserves, doesn’t mean that they won’t be affected by such a financial crisis. China depends on Europe to buy from them so they can sustain a high level of exports which will continue the high amounts of cash flow in their economy. Being that the entire world is globally interlinked, this gives accurate explanations for financial slowdowns happening all around the world. The financial crisis in Europe also affects other countries around the world that trade with Europe and China. Being that Europe’s economy is facing an economic crisis this will only mean that the United States will be faced with another recession. Just as China's economy will be affected so will other big exporter countries' economies be affected due to the lack of such high volumes of orders that are normally exported. The financial crisis is a social problem that affects individuals on a day to day basis affecting people’s daily choices in what they can and cannot buy or what they can and cannot do. It’s amazing how we can take a look at the different economies all around the world and connect them back with how our economy is doing and base our expectations and standards of living on what is happening all around us. We can only hope that China uses some of its foreign exchange reserves to buy some of Europe’s debt so the financial crisis that we are currently in will seek some kind of relief.
Link to Article: http://globalpublicsquare.blogs.cnn.com/2011/09/30/can-china-rescue-europe/?iref=allsearch
2 comments:
You made several good points. We so often look at whats going on in a single country, and not the effects it has on the countries around the world. Europe is in a huge crisis, but due to globalization it has an impact on every major market in the world. Instead of competing to become the richest country, we should work together to make sure our economies can survive into the future.
It’s easy to see how other countries may panic due to what has occurred in another country. The Recession that is occurring in the U.S. has everyone wondering if things will continue to get better or if things will get worse. Once an economy shuts down in one country others take extra precaution in assuring that it doesn’t happen to them. Some nations are very dependent on one another especially if one country has more than enough resources. China is responsible for more than half of the goods that are sold in the import export business.
Post a Comment