China's Stocks Head for Weekly Gain on Policy Outlook, Europe Article

chinawares Stocks Head for Weekly Gain on Policy Outlook, Europe - Article Example correspond to the article, the stocks experience the biggest gain during the week in question influenced by signs that the Greek debt problem will be resolved and speculation and rumors about expected policy changes by the brass (Shidong, 2011). The European Union has been reeling below a string of debt crisis in several of its members the most notable being Greece, Portugal, Ireland and recently Italy. This crisis has had effect on stocks across the globe. Although Europes problems may seem less of a concern to china, the truth is that what happens in Europe affects China in a big way. This is because the EU is the largest export market for Chinas goods. The EU accounts for 25% of Chinas exports. In the first nine months of 2011, trade among China and Europe rose 21.8% year-on-year to stand at $372.12 billion according to statistics from Chinese authorities (Banerjee, 2011). The EU debt crisis ha s a direct bearing on Chinas frugality because a reduction in pack here means a reduction in Chinas export. Since Chinas miserliness is export-based (Czinkota, Ronkainen, & Moffett, 2011), any reductions in the amount of exports have the net effect of slowing down the countrys economic growth. This is exactly what the crisis in Greece, Spain, Portugal and most recent Italy has done. This paper is going to evaluate the relationship between the EU debt crisis and the performance of Chinas stock exchanges. The paper will find that when there is a crisis in Europe, the demand of Chinas goods in these region goes down which affects the performance of the exporting companies stellar(a) to lower export clams. The lower earnings drive the prices of the stocks involved down. On the contrary, positive indicators on the EU economic performance drive up the value of the stock in the market as tidy sum become more(prenominal) optimistic. As per the article, the value of the stock of major companies in China rose aft(prenominal) the recent progress on the Greek debt problems. This is because the said progress increases investors sureness in taking more risks. A solution to the debt crisis will besides stabilize the EU which is the biggest export market for China. This stability increases the confidence of investors considering that a stable EU will buy more from China and therefore increase the earnings of Chinese companies. It is this expected increase that drives up the prices of stock as investors expect improved dividend payments. The stock increases were alike supported by speculation that the Chinese authorities will undertake more measures to ascension growth. For instance, the shares of China Petroleum and Chemical Corporation and of PetroChina Co. increased by at least 1.5% due to speculation that the government may give refiners the freedom of adjusting prices on their own (Shidong, 2011). The increase in the price of stock is also aided by the governm ents announcement that it will step up measures to help clear business to have easier access to bank loans. The government is further expected to cut banks reserve requirements to boost manufacturing industry as reports of a slowdown in manufacturing emerge and inflation eases. The case highlights the challenges the Chinese locution as they do business on the global scene. On one hand the Chinese economy is too dependent on exports. This means the economy is very much affected by what happens on the global sc