If you follow the financial world even a little, it’s clear to see how China is having a big impact on U.S. stocks and the overall market in general. China is the world’s second biggest economy next to the U.S., so when it has problems the rest of the world including the U.S., does too.
China and the U.S.
The U.S. does a lot of trading with China and when Chine has economic problems like it has now, this impacts the U.S. and its stock market. The U.S. imports a lot of good from the U.S., far more than it exports. As the Chinese economy slows down this impacts the U.S economy because the U.S. economy relies a great deal on Chinese goods. As the Chinese stock market goes down or goes through turmoil, this has a direct effect on the U.S. stock market although usually not as severe as the U.S. stock market is seen as a lot safer. Corruption and other issues are playing a large role in the problems with the Chinese market.
In China, they import a lot of raw materials from the rest of the world just as oil, metals, lumber and other commodities. As China’s economy slows down, they don’t have as much demand for these commodities so the countries that ship them, such as the U.S. have a harder time selling them to China. Many of these raw resources are turned into goods that are then shipped back to the U.S. On the other side of the coin, in the U. S. there’s been a slowdown of the economy and not as much demand for finished goods from China. Both the U.S and the Chinese economy are intertwined.
Less Chinese Growth
There’s now less growth in China as it’s transitioning away from exports and manufacturing. The Chinese economy is being driven my more domestic consumption as their middle class is growing and can now afford a lot of the goods produced by China. A lot of these goods would have just been exported before as the population couldn’t afford them.
While there’s less growth in China, there’s an opportunity for U.S. companies to get into the Chinese market. The economies of the world are becoming more integrated. As the Chinese economy changes, it’s creating a lot of uncertainty in the market. Other factors like oil and low commodities are also playing a large role in the overall market and China.
U.S. Stocks and the Future
When China has problems with its stock market it directly impacts the U.S. market. Both countries are just so intertwined now that there’s no getting away from market volatility when China faces difficulties. Both countries just rely on each other too much.
The Chinese market and the U.S. market will both face difficulties as the entire globe tries to climb out of a global slowdown, reduced commodity prices, and instability in areas like Greece, the Middle East and the European Union. Until most of these problems are resolved, particularly the price of oil, the U.S market will continue to be impacted by global problems and the issues in China.