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China, India relatively unaffected by Euro crisis

May 11, 2010

Although China and India have diversified their foreign holdings post the financial crisis, balancing funds more towards Europe, analysts do not expect the financially sound, stable markets of China and India to be much affected by the European debt crisis.

Exports to euro zone economies will also not be impacted much as the two economies have emerged relatively unscathed from larger crisis in the past and a majority of the bilateral trade is conducted in US$, which hasn’t weakened, finance secretaries in both China and India remarked.

While the euro crisis exposes the weakness of the global economic recovery, it also alleviates fears of a double recession. Relieved Indian and Chinese stock markets rejoiced on Monday after the announcement of the US$1 trillion rescue package from the European Union and IMF. The the benchmark Shanghai Composite Index gained 10.38 points, or 0.4 percent while in Hong Kong, the Hang Seng Index rose 506.35 points, or 2.54 percent, to finish at 20,426.64. Indian shares surged 3.4 percent on Monday to record their biggest percentage gain since July 2009. The Bombay Stock Exchange’s Sensitive Index gained 561.44 points to end at 17,330.55 after falling 4.5 percent last week. The National Stock Exchange’s 50-stock S&P CNX Nifty added 175.55 points, or 3.5 percent, to close at 5193.60.

The European Union is China’s largest trading partner and accounts for 26 percent of India’s exports.

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