IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: IMPACT OF GLOBAL FINANCIAL CRISES ON CHINA

After starting the journey in 1949, the economy of China faced many ups and downs. At the time of first three global financial crises, as shown in Figure 2 below, there were quite hard times for its economy. During the reign of Mao Zedong, economic relations with outer world were not that much but his ancestors, Deng Xiaoping especially, decided to open the doors of China for whole world in 1978 (MacFarquhar, 1987). The rainy days of Chinese economy are no more now and its economic growth plus position among economic giants is an open secret. It is observable in Table 2 that China was going impressive in terms of economic growth during 1950s but GDP growth percentage went deep down (i.e. -27.30% in 1961) as a result of the global financial crisis 1958. Its economy again faced the negative GDP growth after the global financial crisis 1974. During the Asian financial crisis, China successfully avoided the negative GDP growth but the crisis interrupted this pace of growth by lowering it down from double figures to single digit. It happened again in the next decade when global financial crisis 2008 smacked down most of the economies.

This financial crash not only wrecked the American and European economies, Asia was thrashed severely as well. The emerging economy of China also had tough time in terms of rise in unemployment and inflation along with decline in GDP growth. If we look from the GDP growth’s point of view, the economy of China was hit by all the financial crises and its economy experienced the decline in GDP growth during all the crises at global and international level.
As mentioned earlier, five big financial crises took place during the lifespan of Pakistan and China which were related to these nations. To analyze the impact of these crises, we have used the data of Pakistan’s GDP growth, from fiscal year 1951 to 2009, which is taken from the website of Federal Bureau of Statistics (FBS) while China’s GDP growth from 1953 to 2009 is also used in the analysis. The financial crises of 1958, 1974, 1979, 1997 and 2008 are taken as break points in our methodology.

Table 1: Pakistan’s GDP Growth

Year Growth % Year Growth % Year Growth % Year Growth %
1951 -1.S0 1966 3.0S 1931 7.56 1996 1.70
1952 1.72 1967 6.79 1932 6.79 1997 3.49
1953 10.22 196S 6.49 1933 3.97 1993 4.13
1954 2.03 1969 9.79 1934 3.71 1999 3.91
1955 3.53 1970 1.23 1935 6.36 2000 1.96
1956 2.93 1971 2.32 1936 5.31 2001 3.11
1957 2.54 1972 6.30 1937 6.44 2002 4.73
1953 5.47 1973 7.45 1933 4.67 2003 7.43
1959 0.33 1974 3.33 1939 4.44 2004 3 96
I960 4.39 1975 3.25 1990 5.42 2005 5.32
1961 6.01 1976 2.34 1991 7.57 2006 6.31
1962 7.19 1977 7.73 1992 2.10 2007 3.63
1963 6.43 1973 5.53 1993 437 2003 121
1964 9.3 S 1979 733 1994 5.06 2009 4.09
1965 7.56 1930 6.40 1995 6.60

Table 2: China’s GDP Growth

Year Growth % Year Growth % Year Growth % Year Growth %
1953 15.60 196S -4.10 1933 10.90 199S 7.SO
1954 4.20 1969 16.90 1934 15.20 1999 7.10
1955 6.SO 1970 19.40 1935 13.50 2000 S.00
1956 15.00 1971 7.00 1936 S.SO 2001 S.30
1957 5.10 1972 3.30 1937 11.60 2002 9.10
195S 21.30 1973 7.90 198S 1130 2003 10.00
1959 S.SO 1974 2.30 1939 4.10 2004 10.10
1960 -0.30 1975 S.70 1990 3.S0 2005 9.90
1961 -27.30 1976 -1.60 1991 9J20 2006 11.10
1962 -5.60 1977 7.60 1992 14.20 2007 11.40
1963 10.20 197S 11.70 1993 13.50 200S 9.60
1964 1S.30 1979 7.60 1994 12.60 2009 S.70
1965 17.00 19S0 7.30 1995 10.50
1966 10.70 19S1 5J20 1996 9.60
1967 -5.70 19S2 9.10 1997 S.SO

Figure-2

Figure 2: GDP Growth of China