The Spillover Effects Of The European Sovereign Debt Crisis And Its Influences On Chinese Economy

With the economic globalization and financial liberalization, the world economyhas rapidly developed. On the other hand, they increase threats of financial risks.European sovereign debt is one of them and becomes a global economy focus.In late2009, Greek sovereign debt crisis broke out. Following it, Portugal, Spainand Italy etc. have got into financial difficulties. And even the economic powers,France and Germany, start at risk. European sovereign debt crisis has become asystematic crisis, bringing panic to the financial market and global economy, and alsocausing other courtiers to re-examine their sovereign debt crisis.Firstly, the paper introduces the outbreak and evolution of the Europeansovereign debt crisis. Then, from the perspective of foreign and domesticenvironments, it makes analysis on the causes. It also proposes the temporary andcrucial solutions to it. Besides, it demonstrates the current situations by means of theupdated statistics.Secondly, through the introduction to Greek crisis, it analyzes the diffusionprocess and spillover mechanism. To get emergency bailout, EU member states takeausterity measures. This in turn, results in years’ of economic recession. On the otherhand, because of the downgrading of sovereign credit rating, concerns intensified,making it difficult or impossible to refinance their debt.Thirdly, the impacts of European crisis on China are analyzed. The Europeansovereign debt crisis harms the international trade environments. So, it holds back ournational trade, affects foreign reserves and foreign investment. To effective verify theinfluence on China’s trade. The paper makes analysis on it by virtue of statistics andmodels. The analyses show that the European sovereign debt crisis has severelyaffected our foreign trade.Finally, the paper summarizes the implications on China’s economy. It points outthat China’s government should take right attitudes and properly deal with our government’s debt. Facing serious local government’s debt, local governments shouldcontrol the scale of debt and improve its ability to pay off the debt. China’s centralgovernment should strengthen macro-control and financial supervision. And it shouldalso improve the financial system to guard against financial risk exposures.Furthermore, China should promote social welfare system, which should be suitablefor our current national situations, and should stay rational on RMB integration.