#  Is another wave of crisis ahead of us? [CINKCIARZ.PL ANALYSIS] 

The difficult situation in China is affecting the global financial markets since the beginning of this year. How serious is this problem? Should we expect another wave of crisis to hit Poland? Piotr Lonczak, Cinkciarz.pl analyst, answers these questions.

The beginning of 2016 has been dominated by the concerns regarding economic situation in China. A breakdown of quotations on Shanghai's stock market intensified the speculations about the forthcoming serious slowdown of the Chinese economy. The negative scenario assumes that the crisis could first affect the Asian region, and then hit the United States and Europe. Can the general decrease in export to China eventually harm the Polish economy?

#### Turbulent year on the global markets

In the past years we have observed many events described as “crisis” in the media. Even though this term was mostly abused, one cannot deny that different sort of economic problems went across almost every continent.

Some serious events could be observed especially in January 2015. At that time the Swiss National Bank resigned from keeping a rigid exchange rate of the franc to the euro. As a result, the price of the Swiss currency went drastically upwards. Breakdown of the Russian rouble's exchange rate was also an important event. Additionally, the European Central Bank (ECB) announced a will to purchase the bonds of the eurozone's countries in March.

The following months were also interesting. The lowest for many years prices of oil and other raw materials affected the countries which export these goods. The problems got bigger in the second half of the year. At that time, depreciation of raw materials' prices intensified. Also, Brazil, the Republic of South Africa, Turkey and Russia experienced significant problems of political instability and corruption scandals. This lead these countries to economic disturbances. First part of the year also went under the sign of defending the eurozone's integrity, and stabilising the Greek finances.

The first symptoms of the Chinese problems could be observed in Summer 2015. One of them was a breakdown on the Shanghai's stock market in August. At that time the People's Bank of China wore off the renminbi by making an intervention on the currency market. This intervention was justified with necessity of adjusting the Chinese currency's exchange rate to the market mechanisms. Investors saw a will to improve the price competitiveness of export in these actions, and this was supposed to be a proof of the Chinese authorities' anxiety regarding the economic perspectives.

The past year's last spectacular event is the Federal Reserve's decision about raising the interest rates in the USA. The first increase in cost of credit since 2006, was received quite calmly by the investors. It was the opposite in the case of the European Central Bank. Its decision did not fulfil investors' expectations, who were counting on an increase in money printing. Due to this, the ECB caused quite a commotion on the financial markets.

#### Perspectives for the Polish economy

Despite the fact that 2015 was very turbulent for the financial markets, it was at the same time quite good for the global economy. Poland was also doing pretty well. However, the GDP increasing at the pace of 3.6% does not fully show the scale of achievements. Record employment (more than 16.2 million people), unemployment level (the lowest since 2008) and an increase in export (7.1%), illustrate this phenomena much better. Sale of the Polish goods to the eurozone between January and October 2015 increased by 12.5%. This is an amazing result considering the weak condition of the monetary union.

We can assume that the events from China will not have a significant impact on the Polish economy. Direct correlations between the Polish and Chinese companies are relatively small. Only 0.99% of the Polish export went to China between January and October 2015. Thus, even a great depreciation of sell on the Chinese market does not have to affect the results of the Polish companies.

Poland is connected with China by Germany. 27.1% of our export hits our western neighbour, making the Germans our most important trading partner. In this case a decrease in the German export to China could result in a limited demand for the Polish goods. However, this danger seems a little overestimated. China is the fourth most important partner of Germany, responsible for 6.6% of export. Three most important destinations of the German products are France, the United States, and the United Kingdom (it gives the total of 25% of export). The economic situation of the two latter countries is very good (the unemployment is lower than before the 2008 crisis, and the GDP growth is stable). This means that the demand for the German products in these countries will compensate for a lower export to China.

Poland should also take advantage from the revival in the eurozone. Many factors show that 2016 will be a turning point for the monetary union. Our most important trading partner (56.5% of the Polish export) is doing better and better due to the ECB policy which is supportive for the economy. Considering these factors, one can assume that the following twelve months will be even better for exporters, because the weaker zloty will support export to a greater degree than it did so far.