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China situation worrying the world

The financial markets are currently very concerned about the Chinese economy. This economy is likely to be heading for a hard landing and that isn’t good news for the rest of the world. China may even be confronted with a recession. Many economists are particularly concerned about the Chinese debt problem that could cause serious damage to the world economy. If the economy slows down in China, there is little chance that the rest of the world still can count on a reasonable economic growth rate. In a worst case scenario we could even expect a worldwide recession.
Another devaluation of the renminbi
Because of the concerns about the situation in China, international share prices decreased heavenly during the first week of 2016. Almost everyone agrees that a severe economic crisis in China represents the biggest economic risk in the new year. A major reason for concern is the renminbi, the Chinese currency. The People's Bank of China (the central bank of the country) has decided to devalue the renminbi again. This measure gives investors and business leaders a worrying signal about the current worrying state of the Chinese economy. A devaluation is designed to make a currency cheaper so that the economy can be stimulated. This might point to the fact that the Chinese authorities themselves are very concerned about a too rapid cooling of the economy.
Oil prices still under pressure
This concern is also the reason why the oil price has declined further. In recent days the level of 30 dollars a barrel has come into sight. More and more analysts believe that a price of 20 dollars a barrel in the coming weeks or months is possible. There is even some talk of a price of 16 dollars. For fleet managers the low oil price is not directly bad news, on the contrary. Cheap energy means good news for the economy. The problem, however, is that a weak Chinese economy will also have consequences elsewhere in the economic landscape in the form of weaker economic growth in the rest of the world. Cars and energy may subsequently become cheaper, but in the end no one can be happy about a weak economy. 14/01/2016  |  Jos Sterk

TAGS : Economy 

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