The Chinese dragon seems to have run out of fire, with nearly 40% of its market wealth&nbsp; wiped out in less than a month. But the bigger problem is its contagious effect on other&nbsp; global markets. The symptoms are already visible, with global markets now responding to&nbsp; developments in China rather than in Greece.&nbsp; China was one of the main engines driving global growth and now it’s sputtering is sending&nbsp; panic waves across the globe. The initial reaction to the Chinese market meltdown was that&nbsp; it was only a market bubble and that the Chinese economy would remain isolated. But&nbsp; Chinese stocks listed globally, be it in Hong Kong or the US have also fallen, suggesting that&nbsp; the repercussions on the economy might be real.&nbsp; With a GDP growth of 70℅ in the second quarter of 2015, its economy flattering, seems unlikely. The Chinese government was stepping on the brakes in an attempt to shift the economy&nbsp; from a manufacturing base to a consumer-driven economy. Chinese officials attempted to&nbsp; inflate the real estate market but that did not work. They then nurtured the equity markets&nbsp; which would act as an important source of secondary income to its population to drive&nbsp; consumer demand. This worked for some time but then became The markets had run far ahead of the economy. The first quarter of the current calendar&nbsp; year was the slowest in the last six years, while the market touched a new high at bubble-&nbsp; like valuations of 46 times earnings.&nbsp; The world has been insulated from the meltdown in Chinese market thanks to its low&nbsp; exposure in mainland China of less than 1% of market capitalisation. But there will be no&nbsp; place to hide if Chinese consumption slows down, impacting almost every country in the&nbsp; globe.&nbsp; Here are five ways in which Indian economy may be impacted in case Chinese economy&nbsp; crash lands.&nbsp; 1. Good for smart cities: Hard commodities have been hit in expectation of a Chinese&nbsp; slowdown. Copper is trading at a 6-year-low. China is the world’s top copper consumer,&nbsp; accounting for 40% of global consumption. Similarly, aluminium is trading at new lows and&nbsp; is already trading at prices below cost of production of many Chinese companies. For India&nbsp; as a consumer, this is good news as the cost of constructing new infrastructure, especially&nbsp; smart cities, will come down. For producers of these metals, low prices are bad, especially&nbsp; so because China has resorted to aggressive selling to clear its inventory and raise cash&nbsp; during adversity. Little wonder metal stocks are bearing the brunt of the fall.&nbsp; 2. Good for deficit and inflation management: Oil prices were already taking a beating, with&nbsp; global slowdown and a possible US-Iran deal, China only nudged the prices lower. For India,&nbsp; low oil prices helps in controlling its deficit and keeps inflation under check.&nbsp; 3. Bad for automobile producers: Automobile exporters and manufacturers, especially Tata&nbsp; Motors will feel the pinch as China was its fastest growing market, especially for JLR, and&nbsp; the company was investing in the market to drive future growth. But auto-ancillary suppliers&nbsp; will be hit as China consumption falls.&nbsp; 4. Gold might glitter: Chinese had overtaken India as the largest consumer of gold. Prices of&nbsp; gold have slipped to a four month low in expectation that the present meltdown will spill&nbsp; over to the gold market. But the fall in gold prices seems to be a temporary blip. China&nbsp; imported 36% more gold both on a year-on-year and month-on-month basis, suggesting&nbsp; investors are parking their money in safe havens. Gold prices may move up soon.&nbsp; 5. Mobiles can be cheaper: The real impact of the Chinese meltdown will be clear from the&nbsp; government’s action in the foreign exchange market. China has been pegging its currency&nbsp; against the dollar but the Yuan which also trades on the New York currency exchange hit a&nbsp; three month low on fears that the market meltdown will impact the economy. If the Chinese&nbsp; officials do devalue their currency to push growth, world markets will be flooded with&nbsp; Chinese goods at low prices affecting exports of other countries including India.&nbsp; .&nbsp;

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The Chinese Economy and Its Effect On Indian Markets

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