Page 4 - MEX Express - Vol 6 Issue 2
P. 4                                        MARKET PERSPECTIVE                                                                                                Volume: 6 • Issue: 2 • Year: 2014 A.D

Retarding Chinese Economy & its Global Implications!

     “China’s economy is slowing down” a topic          in the last quarter it showed only around 7.5 percent    Another major economy group that will feel the           economy will surely affect the Euro zone’s effort to
which is most discussed nowadays within the             growth.                                                  heat of this slowdown is ASEAN, with whom the            aground to a pre 2008 crisis level. Until and unless
global financial circles. For those who were jealous                                                              china’s trade has grown 30 fold in the last 15 years.    there is a major crash landing, U.S. economy will be
of the rapid development of China since 1980,                In order to tackle contingencies in net exports     Indonesia with their commodities and Thailand            left out with slight scratches. Even this slowdown
their domination in world trade and rising of a         resulted from the 2008 crisis; Chinese government        with their rubber and computer parts will be most        bring down the demand of sophisticated materials
communist country next to U.S., this news brought       immediately came with a monetary stimulus. This          affected. China is taking quarter of the total overseas  that had been exported from the U.S., as it only
cheers. Discussion revolves mainly around the           actually changed to a lending boom which developed       exports from South Korea, so any direction to cut        amounts to a decline of $6 billion, it may not affect
implication of contraction of the world’s second        aggressively to an investment boom. Because of           these will tamper the country’s economy. According       a large economy like U.S.
largest economy on the global economy. But as in        these measures, China somehow manages to slip            to experts, if Chinese economy slips in this way, a
any discussion, there are people who say that this      from the claws of 2008 crisis. But now the export        commodity glut will be created thereby forcing a              According to analysts, two reasons can trigger
slowing will badly affect the world economy and         sector is really showing signs of bleeding with a                                                                 this crash landing. One is the tumbling of exports
those optimists who see this as an opportunity          rate of 3.1 percent year on year in June. By shadow      30 to 40 percent decline in the price of base metals
to be benefitted from. Recent negative economic          banking, lending to high risk borrowers, total credit    and 30 percent decline in the prices of Brent crude.     and loss of migrant worker job and other may be
data out from China combined with country’s first        in the Chinese economy is now 200 percent points         But many commodity importing countries such as           insufficient funding from government. Either way an
bond default bring back concerns about the state        to GDP.                                                  Philippines, India and Turkey are eagerly waiting        overinflated credit bubble which can burst anytime
of Chinese economy and the risk of credit bubble        Global Implications                                      and started planning to take advantage of this price     is hanging over Chinese economy and thereby over
that looms in the market. One thing is sure if this                                                              fall.                                                    world economy like a “Damocles Sword”.
reduction in pace is a reality; it will send its shock       Last five years, China accounts for half of
tremors around the globe.                               worldwide growth. So any decline in the pace                  Euro zone will also feel the tremble of the shock              " Nijesh Ramraj
                                                        of biggest consumer of raw materials, will also          waves generated by this slow down. Exports to china
       China government, after overseeing the           decelerates the pace of other countries’ economies.      are rapidly on its downtrend in Germany. Many
fastest growing economy in human history, is now        Thus all who are exporting and importing to and          companies from various industries like car making,
preparing itself to manage this inevitable event.       from china will be swept away by tsunami raised          electronics and software cut their yearly forecast for
But the reforms whatever they have introduced till      by the plunging of Chinese economy. Over the past        china following this downtrend. Being the biggest
now are yet to deliver. International Monetary Fund     decade, majority of copper, iron ore and steel was       economy in the Euro zone, contraction of German
recently revised down the growth prospects of the       consumed by China thus driving prices of these
China that too without a bounce back, assert this       commodities to record highs. Thus with a low
slow down. As Chinese economic model is lying           demand, the first set of economies that will get
mainly over the heavy investments in infrastructure     affected are those countries who are supplying these
building, production sector and exports, a credit       commodities to China.
collapse, resource wastage and faltering global
partnerships will have a monumental long term                China, making 10 percent of its GDP, is the
effect. As in the current scenario, China plays very    biggest trading partner of Australia, a commodity
significant role in the shaping of many economies,       rich country. As 10 percent of nation’s job market
hence its recent borrowing policies, slowing            and 20 percent of national output is in the resource
consumer demand and increasing unemployment             industry, less thirsty china will force them to unleash
rate will expose those countries to vulnerability.      contingency plans to keeps their economy floating
Post 2008-Crisis                                        for next decade. China is also the largest trading
                                                        partner of South Africa. Diamonds, platinum, gold,
     China’s GDP growth was extraordinarily high        coal and iron ore which together account for 41
touching 15 percent before the 2008 crisis level but    percent of South Africa’s yearly exports to China.

U.S Federal Reserve under the Leadership of Janet L. Yellen

     “It depends what the circumstances are.”           expressed his confidence in her ability to get things     setting committee stuck in a single course. After             Yellen, who also runs the Federal Open Market
                        - Janet Yellen on Aug 13, 2014  done. In her career, Yellen has written many papers      which the U.S economy has rebound recently. Ms.          Committee, is working on to rejuvenate the U.S
                                                        and publications, some even co-authored by her           Yellen knows how to put her views into practice.         economy without having to trigger the inflation and
     The new chairman of Federal Reserve, Janet         husband, a Noble Prize winning economist and                                                                      asset bubbles. She strives to achieve the sustained
Yellen served as the Vice Chairperson of the            UC Berkeley professor George Akerlof. For her                 For decades, the main concern of the monetary       growth with easier credit, employment opportunities,
Federal Reserve Board for four years until she was      contribution in the field of economics she has also       policy was to control Inflation and detect signs of       elevating stock prices, improving global economy
appointed as the first Female chairperson of the         received many honors.                                    recessions by adjusting the short term interest rate.    and Fed’s prepared monetary policies. Where the
Federal Reserve Board of Governors in 2014.                                                                      But now, the major challenge for the monetary            inflation is concerned, it is below the Fed target
                                                        Federal Reserve                                          policy is futile growth. Janet Yellen has the            and increase in the level sometimes does not put
Janet Yellen Life:                                           The Fed is composed of the Board of Governors       responsibility to navigate and instigate financial        threat to the set level is what she considers. Rather
     Born in August 13, 1946 A.D in Brooklyn, New                                                                markets in order to convince that the Fed knows
                                                        appointed by the president, the                                                                                                       she would prefer the increase in
York, Janet Louise Yellen graduated from Brown          Federal Open Market Committee                            what it is doing since, Federal Reserve has to rely                          wage inflation which has chances
University in 1967. While in 1971, she pursued          (FOMC), twelve major regional                            on controversial and less tested tools, such as                              of increasing the consumer
her Ph.D. from Yale University. After a teaching        Fed banks, many private U.S                              bond buying. Fed Chairperson Janet L. Yellen has                             expenditure. With increase in
profession in Harvard University, she served the        member banks and various                                 pulled the strings of unconventional policies, from                          labour pay, the economy has
Federal Reserve from 1977 to 1978. Then she went        advisory councils. The committee                         bond buying to ‘forward guidance’ even when                                  better prospect of growing. This
to University of California to be a professor. Filled   of FOMC is responsible for                               she served as a vice chairperson of the Fed. Her                             concept of her has influenced the
with perseverance, Yellen worked on the White           developing monetary policy.                              approach follows the footstep much like Mr. Ben                              Fed towards a new direction of
House Council of Economic Advisers from 1997            Under the rule of U.S congress, the                      Bernanke the predecessor Chairman of Fed which                               stringent labour market.
to 1999. Her career took a further boost when she       three key objectives for monetary                        is technocratic and thorough command of the data.
was appointed the president and CEO of the Federal      policy in the Federal Reserve                            Her approach is rather a safe approach that might                                 The approach of current Fed
Reserve Bank of San Francisco. Then her path in         Act are improving job market,                            help to reduce further the market volatility.                                Chairperson is really seemed
Federal Reserve Board of Governors started from         stable prices and moderate long                                                                                                       to be working. U.S economy is
2010 as a Vice President. Finally in 2014, President    term interest rates. With years,                                                                                                      gradually progressing and the U.S
Barack Obama appointed her as the Chairperson of        the duties of Fed is increasing,                                                                                                      currency is strengthening against
the Federal Reserve.                                    that includes, implementing the                                                                                                       other currencies like Euro, INR,
                                                        nation’s monetary policy, regulating and supervising                                                                                  Yen, and Won etc. Until the Fed
     She played many roles in the Federal Reserve,      financial institutions, maintaining stability in the                                                               Chairperson’s view on Labour market remains the
becoming a leading figure in U.S monetary policy.        financial system and making financial services                                                                      same, we can only presume where the market will
She held the determination to get things done           available to depository institutions, the U.S                                                                     make a move.
especially to reduce unemployment even if it cost a     government and other foreign official institutions.
bit higher inflation to achieve it. She outstood with                                                                                                                                            Sarmin Rauf
her willingness more than the other economists.         Janet L. Yellen as a Federal Reserve Chairperson:                                                                                       Bachelors in Business Administration
                                                             Janet L. Yellen is strong footed in her path;                                                                                      Banking & Insurance
     This is the very first time in the history of                                                                                                                                               Pokhara University
the Federal Reserve that a woman chairperson is         her main focus is in the course of reducing
appointed. She is also the first Democrat to hold        unemployment. After narrowing down of U.S                                                                                             Page 04
the post in almost three decades. Even the president    economy in the first quarter, Yellen led Fed’s rate
Obama himself admired her good judgment and

Editorial Board: Mr. Chittaranjan Pandey / Mrs. Liberty Shakya / Mr. Lakshman Pandit / Ms. Shubhechchha Mulepati
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