IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: CONCLUSION AND IMPLICATIONS OF THE STUDY

In case of China, we can easily observe that probability of F-statistic is less than the level of significance in all the years of financial crises which leads towards the rejection of null hypothesis (H0) and acceptance of alternative hypothesis (H1) i.e. Break point was discovered in the GDP growth; hence all the financial crises caused damage to the economy of China. These findings are summarized below. It is evident from the graphical overviews and statistical results that China faced more financial crises as compared to the Pakistan. The interesting fact to be noted here is that China was established two years later than Pakistan and its economy faced more external financial blows but yet has successfully managed to become the second biggest economy of the world. Another notable reality about China’s economy is its quick recovery after all the five financial blows discussed in our study. Moreover, the recovery was not in terms of positive GDP growth rather it was remarkable to maintain the same pace so quickly. To know the comparative economic performance during these crises, let’s have a look on the decade-wise GDP growth of both countries. Despite the fact that Chinese economy faced hard times during all the financial crises, its decade-wise GDP growth percentage is lower than Pakistan only in the 1960s and in all other decades, Pakistan is nowhere near to its growth rates. Pakistan was not hit by the financial crisis 1979 and 2008 but its GDP growth of 1980s to first decade of the twenty-first century is still far away from China who faced these crises. It leads towards the opinion that there were other issues which proved harsher than the external financial crises for Pakistan. Following are the most eminent internal issues of Pakistan during the time period of 1951 to 2008. It is translucent from the above given details that Pakistan went through severe devastations internally. Unluckily, this nation lost its eastern part (now Bangladesh), faced four martial laws and equal number of wars during its 64 years’ history and went to the edge of a nuclear war as well. Incapable and corrupt leadership was another misfortune of this country.
Pakistan and China have experienced five big financial catastrophes since their establishment, of which four were global crises and one was international. Our study concludes that nearly all of these crises affected Pakistan’s economic and financial position in one way or other except the crises of 1979 and 2008 which were not disastrous for Pakistan at their. Besides external crises, Pakistan’s internal matters created huge problems and caused severe damage to the economy. On the other hand, out of the six decades’ journey from 1949 to date, all financial crises affected the economy of China right from their inception. Referring to the main research question of our study, we conclude that China faced more external financial crises as compared to Pakistan and internal problems proved more disastrous for Pakistan than external financial crises.
Our results have some obvious implications for the concerned authorities of the government of Pakistan regarding financial policies and internal affairs management. There is a strong need to learn from the economic growth and financial strength of China which was founded two years later than Pakistan (in 1949) and its economy went through more external financial crises but still has gone far beyond with its enormous progress in various fields. Thus, we suggest sound and firm economic policies, political stability and most importantly the honest and capable leadership for improving the vulnerable situation of Pakistan.

Table 4: Summary of the Chow Test Results

Financial Critic Impact on Economy
Pakistan China
195S Yes Yes
1974 Yes Yes
1979 No Yes
1997 Yes Yes
200 S No Yes

Table 5: Decade-wise GDP Growth Average

Duration Growth %
Pakistan China
1953-1960 4.07 9.56
1961-1970 6.40 4.9S
1971-19S0 535 6.2S
19811990 6.02 9.35
1991-2000 4.09 10.13
2000-2009 5.10 9.SO

Table 6: Overview of Pakistan’s Internal Issues

Year Brief Details of the Issue Year Brief Details of the Issue
1951 Assassination of the Prime Minister Liaqat Ali Khan 1993 Govt, of Muhammad Nawaz Sharif was dismissed by the President of country
1954 Declaration of Emergency by the Govt. 1996 Govt.ofBenazir Bhutto wa s again dismissed by the President of country
195S Martial Law 1999 •    Conflict with India and brief war•    Martial Law
1965 Second War with India 2001 Anti-Gov eminent demonstrations due to U.S. support for attacking Afghanistan
1969 Martial Law 2002 Threat of war with India
1971 *    Third war with India•    Separation оfEastPakistan 2004 Operation against militants in Wazuistan
1977 Martial Law 2005 Severe earthquake in northern areas
1979 ZulfiqarAli Bhutto was hanged 2006 Threats of nuclear war with India
19SS Death of General Zia-ul-Haq in a mysterious plane crash 2007 Chief Justice ofthe Supreme Court was suspended which resulted into rallies and killings in Karachi
1990 Govt.ofBenazir Bhutto wa s dismisse d 200 S Benazir Bhutto was assassinated which gave rise to riots and demonstrations