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World Closely Watching Beijing: Will China Face a Mega-Crash?

© AFP 2021 / STRAn investor checks stock market prices at a securities firm in Fuyang, in eastern China's Anhui province
An investor checks stock market prices at a securities firm in Fuyang, in eastern China's Anhui province - Sputnik International
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The leadership in Beijing is trying to pursue a completely new strategy to prevent a crash. The IMF supports China because it plays a major role in the world economy. But it remains unclear whether China will be able to come out of the difficult economic situation, DWN wrote.

Business leaders, international economic organizations and many politicians have always had a positive perception of China due to its successful track record over past 30 years. The international community has literally assumed that the Chinese leadership can “walk on water,” DWN wrote.

Coins and banknotes of the Chinese yuan are set up together with a U.S. dollar - Sputnik International
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However, as China continues to experience major stock market selloffs in the aftermath of the recent currency devaluation, questions have started to arise about its further economic growth and its ability to come out of the current slump.

With regard to the possible outcome, DWN suggests two scenarios. One of them predicts an economic crash that will have a major impact on other countries such as Brazil, the US and Russia. On the other hand, the country has a relatively small foreign debt and major foreign exchange reserves of around $3,500 billion, which means that the country still exerts much control in global trade.

A customer holds a 100 Yuan note at a market in Beijing, August 12, 2015 - Sputnik International
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According to the newspaper, there are large internal reserves as well, with operating profitability of banks very high and a well-protected banking system.

The crucial question is whether the central leadership will be able to undertake coordinated action and achieve relevant strategic goals, the newspaper wrote, adding, however, that its ability to act is decreasing due to the fight against corruption. 

According to the DWN, the world is not prepared for an economic downturn in China. The central role of China in the world economy leads to its interdependence with other countries, affecting their stock markets and international trade.

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