The detrimental, global impact of China’s slowdown

The detrimental, global impact of China’s slowdown  

Over the past decade, China’s annual GDP growth has averaged at just under 10pc, but recent figures show that this trend has been broken. In the last quarter, China’s reported growth has been 7pc and Western Economists suspect that growth has been much lower and set to decrease further. China’s demand for commodities has decreased as she shifts her economy to consumption, away from investment, thus depressing global prices. Earlier this year, the Yuan devalued, resulting in further decrease in global demand and so repercussions in the global economy.

Oil and exchange rates

Oil and exchange rates

Due to the falling price of oil, net oil-exporting countries, such as Norway and Russia, have seen their currencies depreciate over the past year. The Russian rouble has seen a 45pc decline against the dollar since June 2014, whilst the Brazilian real has declined by 40pc. 

“Oil’s well” “Oil’s not so well”

Oil prices and the global economy: “Oil’s well”  “Oil’s not so well”

Oil prices have decreased dramatically over the past year. The US has increased fracking, extracting oil from shale reserves and thus increasing the global supply of oil. This has been compounded by the fact that Saudi Arabia has refused to cut back on oil production, hoping that the higher prices of oil would force out the US’ shale industry, thus increasing her own market share. Meanwhile, there has been decreasing demand from China as her economy experiences a ‘slowdown’ and shifts from manufacturing to the service sector. As China is the largest importer of crude oil this has dampened global demand. Both of these factors have driven the price of Brent crude oil to below $50 a barrel this month. The effects of such a decrease in the price of oil on the economy will depend on whether the low prices are sustained in the future. If prices remain at $50 a barrel, then net oil importing countries, such as the UK, can stand to benefit from the decrease, whereas net oil exporting countries could lose.