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Europe's 'fire' may bring disaster to China's exports

(People's Daily Online)

15:47, June 15, 2012

Analysts said that the debt crisis in eurozone is spreading to more countries and might be intensified, which certainly will influence the Chinese economy in many ways.

"The eurozone probably will disintegrate. Once it goes bankrupt, it will hit the global economy heavily," Jiang Xianling, associate dean of the International Economics and Trade Institute of the University of International Business and Economics, said.

"Even in the current circumstance, the sustainability of European debt crisis will also cause impacts on Chinese economy in many ways."

Foreign trade is considered as the most influenced field.

First of all, the European Union is the largest trade partner of China and its economic downturn will inevitably lead to weak demand, which will cause decline in export growth of China. As the foreign trade accounts for a large proportion in the economic growth of China, the European debt crisis certainly will drag on the pace of the economic development in China.

Next, the European Union’s direct investments in China will shrink if it is in deep waters.

Finally, due to the depreciation of the euro, the book value of China's international assets especially the foreign exchange reserves will also shrink.

"We cannot ignore the psychological panic brought by the European debt crisis," Jiang Xianling said.

"China's financial market is closely linked with the European and American market. Therefore, the deteriorated situation of the eurozone will impact China's stock market. Furthermore, the European economy is far away from recovery, Chinese enterprises' confidence in investments abroad will also be affected."

Read the Chinese version at: 欧洲“失火”灼伤中国出口, Source: People's Daily Overseas Edition, Author: Zou Yating

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