Recently, the Chinese economy is undergoing a slowdown in the real economy, falling stock prices in the stock market, and devaluation of the yuan in the foreign exchange market. This research analyzes the current condition of the Chinese economy, evaluating the risks in China’s real and financial economy. It also estimates the effects such risks can have on the Korean economy, presenting suggestions for Korea in responding to the China risk.

▶ [Real Economy] The Chinese economy has maintained an annual average of 9.7% growth since its reform and opening up, but this slowed down to 7.3%~7.7% during 2012~2014, and plunged to 7.0% in the first half of 2015, entering the so-called "era of a new normal." Factors such as excessive production facilities, local government debt, adjustments in the real estate market and financial risk are hindering the nations economic development.  

▶ [Financial and Foreign Exchange Market] Chinas stock price, which crashed due to Chinas economic slowdown and a growing distrust in the governments ability to manage the stock market, nonetheless is not on the verge of collapse, as the total value of listed stocks remains above the trend line and the total trade volume also remains high. Moreover, as the correlation between stocks and the real economy is still low, the impact of the recent stock market crash on the real economy will be limited.  

▶ [Koreas Response] As Chinas real economy is projected to continue undergoing a recession, it is important to utilize the opportunities that come from qualitative changes in the economy, while preparing for the risks that economic slowdown entails.