As China falters....

Sometimes, when an elephant walks and falls, apart from the trees around it, unknowingly there are millions of ants and other insects which get trampled and meet their death. Ditto when a giant like China falters and threatens to fall. The immediate repercussions on the developed and currency is there for all to see. But what about those in the fringe who too were running their economy on the back of China?

Mongolia is one such country. The biggest city of the country and its capital, Ulaanbaatar which witnessed a boom when China did well is now floundering. The boom times in Ulaanbaatar have come and gone along with the rise and fall in commodities prices. Exploiting its huge mineral reserves, in 2011, Mongolia was the world’s fastest-growing economy, expanding by more than 17%. But as China slowed down and commodity prices started dropping, like a shooting star, the dream was over before it began.

The money coming into the country then was to be used to build the much needed infrastructure, water and electricity in a country where in winter temperatures go down to as much as –34 Celcius. But nothing happened. Copper which was mined and sold then at $10,000/tonnes is now at $5000/tonne. Many Mongolians risk being dragged back below the poverty line again as the economy sinks, according to the World Bank. Mongolia’s unemployment rate jumped to 8.3% in the final quarter of 2015, from 6.3% a quarter earlier.

As we said, when an elephant falls….