China is one of the biggest countries in the world, not only geographically but economically. In fact, according to BBC News, China will overtake the US to become the world’s largest economy by 2028, five years earlier than previously forecast. The main cause of this accelerator is COVID-19. While the US handled things less than optimally, China’s response was swift, resulting in a return to normal life and re-opening of the economy a lot quicker. In fact, according to CBC the results were quantified with China’s gross domestic product (GDP) soaring 18.3% in the first quarter of this year when compared to the same period in 2020. This marks the largest year-on-year leap since China started releasing their GDP figures in 1992.
So as an American, or someone living in America, can this affect you? Well since the US and China are major trade partners, the effect of one economy on the other is real and powerful. In fact, the relationship between the US and China affects employment rates. Investopedia explains the relationship between the two well, finding that: U.S. companies that generate an important portion of their revenues from China are likely to be negatively affected by lower domestic demand in China. This is bad news for both shareholders and employees of such companies. When cost-cutting is necessary to remain profitable, layoffs are usually one of the first options to consider, which increases the unemployment rate.
What do you think about the relationship between the US and China, and is China outpacing the US in growth problematic?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.