Executive Summary

Despite slower signs of improvement, the global economic situation is still challenging for the developed economies of the world. This paper explores the questions and challenges the world has been facing due to euro zone crisis. The basic issue is “Can the United States, and China support global growth in the coming years despite the European crisis?” Then the complicating sub issues like “economic slowdown in china”, “US budget cuts and debt ceiling” and “weaker economic growth in Asia” are discussed in details and the possible solutions like “China's prospects in the domestic market”, “Need of the debt ceiling raise for US” and “transformation of China's economy from export-led to the domestic market consumption” are briefly discussed. The world has been in some tough circumstances these days, but there is a hope of the positive outcome if the right steps taken at the right time. USA, China, Europe and the rest of the world are making their efforts for the betterment of the global economy.

Table of Contents

Executive Summary1

United States and China despite the European Crisis2

Introduction2

Background2

Major Issues3

U.S China trade ties3

Disproportionate trade of China4

Complicating Issues5

Economic slowdown in China5

US Budget cuts5

Possible Solutions6

Strengthening domestic demand of China6

U.S debt ceiling7

Economy transform of China8

Recommendations10

Work Cited11

United States and China despite the European Crisis

Introduction

Europe has been struggling to pay off its debts since the past few years. This has been one of the biggest issues the world is being faced these days. The head of the Bank of England referred to it as “the most serious financial crisis at least since the 1930s, if not ever,” in October 2011. The major contributors to this crisis are Greece, Spain, Portugal, Ireland and Italy as they are failed to generate enough economic growth. Afterwards, the crisis expanded and destructs the global economy. Now, this is the phase of reconstruction and every country has to take part in it. US and China have major roles according to the size of their economy. Although they are going steady, but the pace is very much below potential. US government set some targets and cut off its budget including the cut off in the defense budget. China needs to progress towards strengthening the domestic demand which will be good for China and for the world's economy as well.

Background

At the start of the year 2008, European Union was hit with a slow moving crisis. This crisis started off with the uproar in the real state sector of USA. It became worsen with the bankruptcy of Lehman brothers in 2008. Soon this turmoil shoved many countries of the central and Eastern Europe such as Hungary, Estonia, Slovakia, Poland, Romania etc. During the first two years, troubled countries were given bailout packages. Within few months this financial havoc grasped the world's economy and created banking panics, downfall in stock markets, currency crisis, financial sector losses and a sharp decline in global economic activities which further lead to the economic recession. Not only the developed economies but all the developing economies of Asia have also been suffering from ...