Why shouldn’t the China crisis worry you?

Markets dwindling, economies struggling and Governments fumbling!! Sounds catastrophic, doesn’t it? Well not quite that catastrophic like a typical “2012” movie or a Zack Snyder directed Superman vs. General Zod fight scene.

Nevertheless the present economic situation of the world is quite precarious. China, the manufacturing hub of the world is on the brink of an economic meltdown.  For the first time in decades, its economy has shaken up with a jolt. While the inflation rate is growing leaps and bounds, producer prices have undergone a free fall. It might not be long before the inflation rate puts the Chinese economy into tantrums.

To add to the woe, the global purchaser USA is suffering a serious dearth of cash flow. It is a widely known fact that the biggest consumer of credit on Mother Earth is the United States of America. But now the cash required to feed it’s credit is drying up slowly which might pose a serious problem to the global economy.

Other nations too are feeling the heat owning to the fact that the two mighty economies of the world is going through an economic slowdown.  This is particularly true for the Asian economies which have been stuck in a conundrum between the Chinese economic crisis and the American shortfall of cash. However, it doesn’t mean that you should be filled with despair. There are ample reasons to be optimistic as well from an investor’s point of view. Just like old leaves fall off a tree only to make way for shiny green twigs, same is the case with the economy. It is essentially a cycle and eventually the bad phase will be over to make way for a brighter economic phase.

So it’s important not to freak out yet. Don’t just start cutting down on your consumption randomly. But doing this, you are simply putting fuel to the fire. Spend on things that are necessary but avoid luxuries.

You must also keep in mind that often, economic slowdowns are the good time to invest wisely. You get time to think and invest in commodities, properties, mutual funds and stocks with a long term prospect in mind. So judge the pros and cons, and make that investment that you were always eyeing to do. You have got to mobilize your finance to make that investment happen though. You can also consider taking a loan if the investment you are going to make is worth it. Even if the economic downturn hits us, i.e. India, we still have some time left to get prepared.

 However, an economic downturn hitting India is less likely to happen. Our economy has a quite robust base and India is to a large extent, insulated from such global meltdown effects. In the past too, the effects of recessions were significantly much less on the Indian economy. So it goes without saying that the present slowdown in the Chinese economy or the USA to some extent, may open up new doors for India. But concern remains on whether to take advantage out of this situation.

So in a nutshell, it can be concluded that there is no need to go for the panic button and you can simply ease up to play it out wisely. The China crisis shouldn’t be a reason for you to lose sleep.

 

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