Expert: Gina Boykin - 10/21/2008

Question
I wonder what will happen to the country if a country export is less? Like the milk scandal crisis, many countries banned importing dairy products from China. What will happen to the China's economy? How it affects the Chinese people?

Answer
In general, countries thrive when people buy the products they produce. This can be people within the country, or outside of the country.  

If other countries do not purchase China's milk, in your example, it affects the dairy industry in China.  The companies that produce milk have to cut down their production, which usually means that some companies may go out of business or lower the number of employees.  People who are out of work cannot pay taxes or buy other goods, which means there is an affect on other companies.  Also, any company that provides supplies to the dairy industry would also be hurt.  For example, the company that provides the bottles for the milk, or the crates to hold the milk will sell less.

However, that same milk company could take advantage of the opportunity to produce something else.  Let's say that the milk producer began to produce orange juice.  The company may do well, and even better than before.  In another example, the milk company could create demand for its products in its own country.  If people in China begin to want more milk, the company can still do well.

Also remember, a country's prosperity is not limited to any one particular product.  If China can find other products to export, it can do well.  Also, tourism is a big industry in many countries.  With the recent Olympics, tourism should grow, which brings money to the country.

Countries also make money by investing in businesses inside and outside of the country.  China may invest in small and large companies.  As these companies grow and make money, the country makes money.

I am not an economist, so I don't consider myself to be an expert, but I want you to know that a country's entire economy is not just based on exports.