China has demonstrated that it is the next largest economy in the world. Almost every country in the globe is a trading partner with China. But the sudden Chinese market meltdown is creating a global impact. The symptoms are already visible. As the Chinese consumption slows down, countries like Australia which is one of the major trading partners is facing trouble. Chinese officials attempted to inflate the real estate market but that did not work.
There are some impacts that can be caused to Indian economy because of Chinese market meltdown. China is the major producer and a global trader for aluminium and copper accounting for 40% of global consumption. With the Chinese market meltdown a lot of commodities like Copper and Aluminium is being traded at below the cost of production of many Chinese companies. In order to attain the market attraction, China is using their metal stocks. For India as a consumer it is good news that the construction projects and infrastructure projects cost to build Smart Cities will come down.
The oil prices are globally taking a beating, with the massive reduction in prices and a possible U.S-Iran deal, China once again lowered its oil price. Oil is also a raw material for almost every industry. Therefore, low oil prices mean lower inflation. This is another opportunity for India as low price can help control deficit.
The auto mobile manufacturing company like Tata Motors will feel the pinch in the Chinese market meltdown, since the company has heavily invested in this sector for driving future growth. With slowing consumption, their demand will fall and the auto- ancillary suppliers in India are likely to be affected. China is the largest consumer of gold while, India ranks the second.
If gold prices fall significantly there is a good chance panic would come to India as well because the Indians are holding a lot of gold. But, China is suggesting investors to put their money in gold to secure the future in heavens. The gold price is expected to increase at any time soon. The real impact on of the Chinese slowdown will soon reflect in the foreign exchange market.
Yuan which trades on the New York currency exchange hit a three month low on fears that the market meltdown will impact the economy. China is likely to decrease its currency value, which makes its exports more attractive and thereby is a shot at reviving the economy.