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Question: Discuss about the Financial Management of China. Answer: Introduction: Each country has its own separate economic structure and resource endowment. This further leads a country to produce different goods and services by utilising their own factors of production. In this context, it is important to mention that, a country can produce all goods and services at its maximum level. It is impossible for them to satisfy demands for their own country. In this situation, a country enters into an international trading operation through a global economic platform. On the other side, each country operates various economic activities within their own territory. Under the concept of world economy, both international and national economic activities take part. In recent world, each country is a part of international trade. As the total number of population in the world is increasing significantly and technology helps them to communicate with each other, the world economy is increasing significantly (Wirtz, Tuzovic and Ehret 2015). Under this global economic platform, some countries, which have significant economic conditions both in national and international markets, play an important role. Those countries are United States, China, Japan, Germany and United Kingdom and so on. In this report, the chosen country is China. This report will discuss about the recent impact of Chinas economic condition in the world market (Taylor 2016). Moreover, it will also discuss about the countrys economic conditions in its domestic market by analysing GDP growth trend, unemployment rate and inflation rate. After discussing the whole concept, an appropriate conclusion will be provided. Background: After United States, China is the second largest economy in the world. Moreover, the country possesses the maximum number of population compare to other countries. Chinas economy has strongly influenced the international economy and world market. In 1970s, the country transformed itself from a closed economy to an exporting hub. After the economic reform in 1978, China is experiencing one of the fastest growing economies in the world. According to the nominal GDP, Chinas economy ranks second in 2016 (Lee 2017). The country also has ranked first according to its purchasing power parity (PPP). China also has earned significant position in international market by exporting and importing goods. The country is the largest exporter and has captured vast portion of international market. At present, Chinas economy is chiefly based on market, which is based on private property ownership. Due to good infrastructure, low labour cost and high productivity, China has established itself as the lea der in manufacturing sector. The country is a member of the World Trade Organisation (WTO) and has captured largest trading power in the world. Hence, China has significant importance in international market. It is continuously rebalancing its economic position by adopting various national and international business methods. However, after international financial crisis, the country has faced a downfall economy. The global financial crisis has no influenced the economic condition of China directly; rather, indirect affects have influenced its economic scenario. China in the world market: Chinas economy is very important because of its large and enhancing economic condition. Moreover, it connects with other countries through trade. At the beginning of 2016, the financial market faced an unbalanced condition when Shanghai Stock Index of China directly declined to 7% within one day (Cashin, Mohaddes and Raissi 2017). As a result, stock market of United States, Europe and Asia declined significantly. After that situation, traders noticed on financial market condition of China. On the other side, economists were trying to analyse the underlying problem of this country related to its slow economy. Hence, the country has faced economic crash during this year. This negative movement of Chinas economy further adversely has affected the world economy. During this economic crisis, China has reduced its demand for oil. Over supply of oil has declined the oil price in international market. As a result, economic condition of some countries like Russia, the United States of America (U.S.A) and the OPEC countries have been affected inversely. Those countries were fully depended on Chinas demand for oil. Hence, they have faced huge economic loss. China also imports iron ore, steel, copper and lead and so on. Hence, decreasing economic condition of China has adversely influenced the economic conditions of all exporting countries at that moment (Hong, Lee, Liao and Seneviratne 2017). Those commodity-exporting countries are Brazil, Peru, South Africa and Australia and more. Hence, due to economic condition of China, world market has faced deflationary pressures. China also has indirectly affected the international trading condition of other countries with whom it did not has any direct relation of trading. This happens because all countries that have exported products in China have also faced huge economic loss. Hence, their unstable economic conditions further help other countries to decline their international business. As a result, various international busines s organisations, which operate their business with China, also have faced huge loss, individually. Chinas economic condition also affects economic condition of the United States. Hence, the financial condition of China can deeply influence the world market. Figure 1: Imports of goods and services of China (2008-2016) Source: (Data.worldbank.org, 2018) As stated above, China has reduced product imports from world market due to its financial crisis and slow economy. This economic condition can be supported by the statistical data of the World Bank. It can be stated from the above figure that imports of China has faced a decreasing trend since 2015. Hence, this figure supports the view that China has declined its imports during last few years and as a result, the world economy has also faced negative impacts. Figure 2: Exports of goods and services of China (2008-2016) Source: (World Bank, 2018) The argument can also be supported by analysing the export trend of the country for the last ten years. China has exported goods and services with other countries and has maintained a stable position. However, due to its financial loss, the country has declined its export services since 2016. Hence, this further has affected world economy. Therefore, from this practical scenario, a clear picture can be depicted easily. In modern business scenario of international market, each country is participating in international trade. All countries are strongly connected with each other by exporting and importing goods and services. In this situation, any strong economic changes affect other countries, as well. China has the largest economy with strong financial support through inward foreign direct investment (FDI) and outward foreign direct investment (FDI) (Taylor 2016). Hence, its economic disturbance affects most of the world adversely. It has great implication in world market with significant market share. The country has also captured huge portion of international market. On the other side, Chinas positive economic condition can influence the world economy in a positive way. Hence, other countries, which are directly or indirectly depend upon China, can face positive economic environment. This implication is also true for all other countries, which also have great share in world market (Huchet?Bourdon, Le Moul and Vijil 2018). Thus, world economy is chiefly based on economic condition of countries like the United States, the United Kingdom, Germany and Japan and so on. Chinas domestic economic condition: Chinas economic condition has faced various phases of economic since 1978. From a planned economy to a market-oriented economy, the country has experienced different economic condition. However, it is important to focus on current economic condition of China. By using some economic factors, this will be easy to describe the present economic condition of China (Green and Stern 2017). Those macroeconomic factors are GDP growth rate, unemployment and inflation rate. GDP growth rate: Gross domestic product (GDP) is an important indicator that helps to measure the economic condition of a country. Hence, to analyse economic condition of China, it will be useful to analyse this GDP growth trend of this country for the last eight years (Yilmaz 2018). Chinas economic reform and slowdown economy has decreased the GDP growth rate at recent years. However, the real GDP of China has a higher value. After analysing this trend, the economic condition of China can be stated. Figure 3: GDP growth rate of China (2008-2016) Source: (World Bank, 2018) It can be stated from the above figure that the GDP growth rate of China has declined steadily, since 2010. Before that, the country has enjoyed an upward rising trend of GDP. Due to worldwide financial crisis, Chinas GDP has faced a sharp decline. However, the economic condition of China has remained better compare to other countries. Except this external factor, some other internal factors have also influenced Chinas GDP to go down. The country has faced significant decline in construction and manufacturing output. Except those chief drivers, some other factors also have affected the growth trend of China negatively. Those factors are industrial overcapacity, debt and inefficient allocation of capital. Hence, the overall economic condition of China is facing a downward phase. This happens due to structural reform of the country. Unemployment: Chinas unemployment rate has remained at a higher level, since 2010 and is still facing some challenges still now. The main reason behind the countrys higher rate of unemployment is its structural reform. The government of China has taken this step for the countrys high economic growth. Hence, this economic reform has brought major changes in the countrys business environment. Moreover, the countrys economic slowdown, increasing rate of population and increasing number of multinational companies have also played import role in this context. China remains unable to overcome this situation (Wei, Xie and Zhang 2017). Economic reforms further affect entire labour forces adversely by cutting down excess labour and introducing early retirement schemes. Moreover, the number of international labour has also increased, due to establishment of multinational companies (Chen et al. 2017). As a result, the labour market of China has faced higher level of competition, which further has affected ma ny people adversely by losing their job. Figure 4: Unemployment rate of China (2008-2017) Source: (World Bank, 2018) This argument of unemployment can be supported by the above figure. This figure is representing an inverse relationship with the countrys national income. After 2010, the country has faced an increasing trend of unemployment due to global economic crisis. However, this rate has not fluctuate to a large extend when the country has faced an economic slowdown. Inflation: Inflation rate is another important indicator to measure the economic condition of a country. This is also applicable for a large economic country like China. Higher rate of inflation is not desirable for any country. China is facing various economic problems for the last few years. However, the inflation rate of this country has almost remained stable since 2012 (Liu and Chen 2017). As the government of the country is trying to attain high economic growth, their fiscal and monetary policies help this China to control inflation rate. Figure 5: Inflation rate of China (2008-2016) Source: (World Bank, 2018) According to figure 5, Chinas inflation rate in terms of consumer prices, increased sharply from 2009 to 2011. After that, this rate declined by a small percentage in 2012. Then, the country has faced almost a stable rate of inflation. However, this inflation rate is facing slight upward trend since 2015 and it may increase further and this is not good for Chinas economic condition. Conclusion: China possesses a large economy with great significance. Hence, the country can influence the world economy by its economic condition. In this context, it is very important for China to take proper economic decision so that world economy remains sustain and uninterrupted. This will further help various developed and developing countries to maintain a stable financial condition. Thus, Chinas economy plays vital role directly and indirectly in world market by influencing various economic factors. Those economic factors, like export and import, relate many countries with each other. Moreover, various international companies will be affected directly with the changing economic pattern of China either in positive direction or in negative direction. This argument can be true for all other countries, which enjoy a large share in the world economy. On the other side, Chinas own economic condition is also facing many difficulties. The country is facing a decreasing trend of GDP and an increas ing trend of unemployment. However, the trend of real GDP of China is high compare to other countries. The country is facing a high rate of unemployment due to its structural reform for higher economic growth. Inflation rate remains at a higher rate and it is predicted that this rate will increase further. However, the economic condition of China is still better compare to all other developed and developing countries. References: Cashin, P., Mohaddes, K. and Raissi, M., 2017. China's slowdown and global financial market volatility: Is world growth losing out?.Emerging Markets Review,31, pp.164-175. Chen, L.X., Chew, Y.B., Lim, R.L.H., Tan, W.Y. and Twe, K.Y., 2017.Macroeconomic Factors Affecting Unemployment Rate in China(Doctoral dissertation, UTAR). Data.worldbank.org. (2018).GDP growth (annual %) | Data. [online] Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?cid=GPD_30end=2016locations=CNstart=2008 [Accessed 25 Feb. 2018]. Data.worldbank.org. 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