Asias Slowdown and British Consumers - Essay Example

Asias Slowdown and British Consumers Introduction China and other countries in Asia are working hard to ensure that they slow down their growth for sustainability purposes; naturally, most countries put a lot of effort in economic development and dominance, especially on an international level (Laforet 2012). China, Japan and Hong Kong are focusing on controlling the demand, supply and circulation of business in their states without the involvement of foreign investors or companies; generally, they aim at foreseeing a slower and desirable growth (Rogoff 2014). However, despite the adverse developments and prospects of these countries, the rest of the continents perceive this as a potential threat, especially those countries that depend gravely on imports or exports from international economic gurus such as China. As China is slowing down its growth to be on par with its exchange allies, it is definite that it will have to evade some of the markets it dominates; for instance, it will halt the production of some of its core exports, or just trade with a few countries in Asia (Channel News 2014). Table 1 below shows China’s trade balance for the gap difference of ten years; 2001-2011 (Techau 2014) Table 1: China’s Trade Balance from 2001-2011 Moreover, the significant investment in infrastructure by foreign countries will also be extinct, being a critical facilitator of development. Obviously, for the strategy to work, the lifestyle for people in Asia has to increase in quality prompting them to adapt to the economic changes; however, the current position of states such as China and Hong Kong makes it hard for this to happen, as it requires them to fail in some of the leading ventures (Knight 2013). Largely, if Asia experienced bankruptcy, especially in countries such as China, it is a prediction that the whole world would feel the pinch, but some continents such as Europe would experience a blow. The idea that Asia has the ability to reduce the pace of development without affecting trade partners, foreign investors or even local companies is more of a fantasy because recession is uncontrollable, as proved by past studies. The best tactic would be for China to initiate a long-term strategy that will prepare the possible victims as they look for other ways out of the situation; however, this would also require countries in Asia to liaise with the international policy makers. China seems to have a good idea, and one would think that this is going to be easy for them especially with the current economic status, but after evaluating the forecasts of the target growth rate with the current one, it requires more efforts (Pilkington 2014). Essentially, China aims at reducing its growth to slightly below 8%, but most specialists argue that due to lack of utter control the reduction will go up to 6%. Definitely, this is a joy for competitors in other continents because for some time now, every country has set its prospectus to the level of China in terms of growth and the economy in general. However, the happiness might be short-lived because China’s growth rate is definitely higher that the numbers given and regions such as the US and the UK do not have even 5% as their highest percentage in the GDP of 2013 and the 2014 quarterly (Hutchinson 2014). The fluctuation of China’s growth is uncertain because the local officials alter the data that they give the central authorities and most of the time they make it smooth with exclusion of major income divisions. The status of Asia’s economy now remains unknown but one thing is for sure, it has slowed down with divisions such as electricity, being the first victims of what some people refer to as a ‘possible recession’. Initially, electricity was among the leading products with an impressive growth in demand; however, since early 2014, the growth has reduced to levels previously recorded by China during its crisis six years ago. Due to the modernized ways of life through technology, the output of electricity does not match its consumption; matter of fact, consumptions is way ahead of production, it has done more than slowing down. The effects of this are also disturbing because the more the consumption of electricity continues to increase the more impact there is on the coal industry leading to closure of some of the plants due to bankruptcy. The demerits and problems do not end with electricity consumption as indicated by the new housing costs that continue to fall since the end of last year. The local officials in China do not give the exact prices, in fact, those used are the asking prices but it does not take an angel to know that this is paucity since countries such as Spain have experienced this in the past. It is not a surprise that this has affected the growth of the rest of the world with the reductions in exports with parts of South America and United Kingdom feeling the adverse effects. Moreover, commodity suppliers in China also continue to voice their cries as the imports division faces the same, especially in this time of the year. Decisively, China and Hong Kong are unreliable when it comes to giving out the right economic data so most of the analysts use what is there, but this makes it hard to know the comprehensive truth on the current economic status of Asia and predict the impact on relative areas such as Britain and America. However, with the knowledge about electricity, it is easy for one to solve the puzzle about some other industries that have attracted a lot of concern since the beginning of the year. In almost every state, electricity is a key determinant of development so once there are glitches with the production and consumption of it, most other sectors fail. As part of the ‘slow-down economy strategy’, a greater part of the economy is changing towards services; however, one might question this as part of the strategy because even if they wanted to focus on goods alone, the electricity crisis would not allow it. All the same, China is stating that most of industries that use power for production are slowing down due to the shift and that the lessening of steel and cement production is part of the strategy and to create a balance. The slow-down brings many unanswered questions especially in mind that the current cheap housing prices came after a long period where these prices were nearly triple; resultantly, this does not utterly dictate the situation in Asia but if it is a modest correction, it sure has a bad start. On the other hand, if it is an outright collapse then Europe is in a very crucial position now and the only way out is to recover from past crisis and get up on its feet about matters of exports and imports. Evidently, the leadership in Asia has everything to do with the slow-down starting with the president of China, who is on the verge of plummeting venality, effluence and loosening the markets to ensure prolonged growth (Orrell 2013). However, one question is if there is a possibility for these initiatives and the slow-down to continue softly without a major interruption of the global market. Considerably, if the markets in Asia were to collapse the repercussions would be massive than the feared United States downturn, because over the years, most states around the globe based their own developments on linkages they had with leading economies like that of China (Nissanke 2009). Decisively, despite the fact that China continues to develop chances of an economical downfall are very high putting western countries in a tricky spot because once this happens countries around the world would be restless. Today, there other international calamities that affect most countries too, but more focus is on what is happening in China with everyone quick to take note of any progress because the consequences would be devastating. Discussion Relative to Demand, Supply and Elasticity For the past three months, there has been a significant decline in demand across Asia and Europe, affecting the global growth, because of the slowdown that is in its early stages. China has increased the prices of exports for most of its consumers, with Germany facing the greatest of its challenges from this (ET Bureau 2014). Additionally, Britain also faced a slight collapse from the same but this was just a beginning for the worries of the uncertain position of growth in Asia because with the inflation the demand of any product linked to China will go down. On top of being core consumers, Europe also has some exports to China and its neighbouring countries; however, with the current slowdown the Euro zone factories have problems ahead. As of last month, their production rate was very low, lower than it was mid last year and for the first time the producers have no idea on what to do about the matter because a lot of its energy focused on China (Cole 2014). Appreciably, the Europe market has made an effort of reducing their sale prices to increase the demand but it has not worked or made any progress since China continues to slow down their growth daily. This is critical because the whole aspect of imports and exports is not going well for the British consumers and producers; in fact, the head bank in Europe has had to make an adjustment in the rates. Despite reducing the inflation-limit for the rates, the bank still faces challenges and in the long last, it will have to do a quantifiable facilitation to increase the demand and supply for its stakeholders. The only way to do this is by buying autonomous bonds to survive and it is no wonder that Britain was among the first states to do this; largely, this is the only way that the bank will avoid depreciation and recuperate development following the slow-down in Asia (Wildau 2014). Significantly, Britain allies also face paramount challenges, for instance, Germany and France have problems with their local factories, which has shrank any sign of development and this has prompted to it dropping most of trade contracts with Britain to protect its own economy. Last month, France announced that next year it would have to borrow funds from the European Union earlier than initially stated, to sustain its brittle economy. In September 2014, there was a mere decline in demand in Britain and Europe as a whole, with the slow-down in Asia initiating; moreover, then, the Bank of England put out strategies that would apply to ensure that this would not affect their country i.e. potential raise of the interest rates the first week of November (Defraigne 2014). Certainly, there is a possibility this strategy will work for some time, but not for long because comparing it with how the slow-down is advancing the repercussions will be greater on everyone including China itself. The supply of products manufactured in Britain and the United States will possibly take a turn for the best especially with the rate that the prices are hiking. The stakes are high for everyone but Asia and Europe are the front-line players and many are trying to establish the best possible ways to implement in the economy for what is coming (Techau 2014). Last month, China made a move before the housing crisis went out of hand, with attempts to reduce mortgage rates and disbursement levels for people purchasing homes. Britain should consider this as a sign for them to move on because there is no way China would take up trans-national problems when there is local havoc; evidently, this depicts the worst because the last time China reduced mortgage rates was a number of years ago during the global crisis. On aspects of elasticity, Beijing was the first to state the obvious and admit the best to way to handle the situation; appreciably, they said that their exports and production would no longer predict their development hence focusing on these areas is defective. The price pressures that result from the slow-down in Asia are alarming for the relative states and this will definitely affect British consumers as most companies lower production to remain in the race (The Economist 2013). However, the prices remain high only for a short period because the current situation has deflation risks written all over it, especially in Asia and Europe. Table 2 below shows the GDP of British economy among other markets since the 1980 to when China started its slowdown (Knight 2013). Table 2: Comparison of British GDP from 1980-2012 All the same, it is essential that the British market and other states or continents that have depended on Asia to take note of the changes and adapt reflecting on the way things were before the slowdown started. Conclusion Resolutely, there is no utter way to predict the final destination for markets in Asia and Europe, but it is essential that consumers prepare themselves for the worst by analyzing and understanding the current pace (Carr 2014). However, for some people and states, this is a once in a lifetime opportunity since most of the affected victims may use a determined and long-term investor by their side for the next five years. 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