IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: INTRODUCTIONFinancial crises are not a new phenomenon; rather world’s history is replete with them. It has been observed that besides its numerous virtues, globalization, starting from early years of nineteenth century’s second half (Eichengreen & Bordo, 2001), changed the nature and impact of financial crises. Highly connected financial markets proved very useful in many aspects but fell an easy-prey to the drastic dangers as well. In earlier centuries prior to globalization, if there was any default or financial epidemic, it was limited to few nations or a continent only but the situation was radically changed with the steady spread of globalization. Currently, not only sound of financial blow is heard worldwide but it actually thrashes the globe too within no time. Recent global financial crisis which started from the United States but traumatized almost all the nations is the best example in this matter. This calamity not only had severe impact in the origin but also left profound marks almost everywhere in the world.
The prime reason of this comparative study about Pakistan and China is the fact that both of the nations are developing countries and on this ground Ma & Jalil have made the comparison of both countries’ financial development, economic growth and adaptive efficiency while Shah, Yuan, & Zafar have also conducted the comparative analyis of Pakistani and Chinese listed companies. Another fundamental reason of this comparison is the life-span of both nations after being established i.e. Pakistan achieved freedom in 1947 while Peoples’ Republic of China was founded in 1949, so both nations had almost equal time to to lay-down the sound brass-tacks and to flourish their economies. As far as the impact of financial crises on Pakistan and China is concerned, during six decades of their foundation, as asserted by Draz, both nations have experienced equal number of financial crises i.e. four out of the seven global financial crises and one severe Asian crisis of 1997 which is another key factor making these two countries comparable for our study.
The structure of this work contains six parts in total. After the inaugural two parts comprising of introduction and literature review, the impact of financial crises on Pakistan and China is explored in the third and fourth part of this paper respectively. Statistical analyses regarding this impact are carried out in the fifth part whereas conclusion and implications are discussed in the last part. The problem statement of this brief work is as under:
The Problem Statement
Whether Pakistan was affected more by the financial crises or China; and what was more drastic for the Pakistan’s economy, internal issues or external financial crises, which caused huge distance between both of the nations in terms of economic development?