The Global Financial Crisis and the Chinese Economy: A Review of the Transmission Channels and Impacts

Abstract

In this study we present an analytical framework providing guidelines for discussions and expositions on the various possible transmission mechanisms of the impacts of the global crisis on the Chinese economy. While the crisis had discernible impacts on its finance, the main channels through which China felt the impacts were trade and trade related ones. One channel is related to the diversification of export markets. Moreover, trade is closely related to the financial system. The global crisis has affected the Chinese economy by triggering worsening conditions of the financial system. Also, foreign investment has played a crucial role after the hit of the global crisis. Still one more important channel is associated with the susceptibility of the economy to the shocks of foreign exchange rates.