Just eight months ago, the Chinese economy was expected to bounce back. been abandoned Covid-0 Buyers and tourists in the country can roam freely. he The increase in the domestic productWhich some economists expected to reach an annual rate of 10% in the second quarter of the year, decreased to just over 3%. He entered the economy deflation. Strangely slow and official response housing crisis And from bad to worse it raised fears of a prolonged recession.
What happens in the world’s second largest economy matters everywhere. how China Although very large, its changing economic fortunes could drive global growth figures. But slowdown China also directly affects the prospects of other countries. Their families and businesses will buy less goods and services than they would otherwise have, with consequences for both the producers of those goods and other consumers of those goods. In some places, difficulties China They will be a source of pain. However, in other cases, they will be a relief.
Commodity exporters are particularly vulnerable to the slowdown China. The country consumes nearly a fifth of the world’s oil, half of the refined copper, nickel and zinc, and more than three-fifths of the iron ore. China’s real estate problems will mean it needs less of these supplies. This will be a serious blow to countries like ZambiaWhere copper and other minerals are exported to China up to 20% of the GDP Australia, a major supplier of coal and iron. on August 22, phpAn Australian company and the world’s largest miner reported its lowest annual profit in three years, warning that stimulus efforts from… China They did not produce change on the ground.
Among the weaknesses of the West Germany. Weak Chinese demand is one of the reasons why the country’s economy has stumbled recently. Some Western companies are at risk because of their dependence on the country for revenue. in 2021, The 200 largest multinational corporations in America, Europe and Japan achieved 13% of its sales ChinaWith revenues of $700,000 million. Tesla It is even more vulnerable, as it generates about one-fifth of its sales China; Qualcommthe chipmaker, achieves an impressive two-thirds ratio.
As long as the slowdown does not turn into a full-blown crisis, the pain will remain concentrated.. sales to China They only account for between 4% and 8% of the business of all publicly traded companies AmericaAnd Europe And Japan. exports AmericaAnd BritainAnd France And Spain They represent 1-2% of their production. even in GermanyWith an export share of 4%, it will be necessary China collapsed so that its economy was dealt a heavy blow.
Further, the difficulties China It comes at a time when the rest of the world has been doing better than expected. in July, International Monetary Fund Its forecast for global growth was revised upward from its April forecast. Most notably, the good health of the largest importer in the world. United Statewhich according to some surveys is growing at a hot rate of around 6%.
Against this background, Indeed, slowing Chinese growth should bring some relief to global consumersBecause it will translate into lower demand for raw materials, which will lead to lower prices and import costs. This, in turn, will facilitate the task Federal Reserve and other central banks. Many have already raised interest rates to their highest level in decades, and don’t want to have to do so any more.
but, What if things go wrong in China? In the worst case scenario, the real estate collapse could reverberate in financial markets around the world. study conducted by Bank of England In 2018 it concluded that “steep drop” in ChinaThis, as economic growth fell from 7% to -1%, would cause global asset prices to drop and rich countries’ currencies to rise as investors flocked to safer assets. together, gross domestic product The British index will fall 1.2%. Although most western financial institutions have relatively little exposure to ChinaThere are exceptions, like HSBC And Standard Charteredand two British banks.
A longer slowdown may result China To withdraw from himself, curtailment of investments and loans abroad. And after becoming the world’s largest bilateral creditor in 2017, it has already reduced lending due to failed projects. Administrators can become more selective if they fight fires in the home. Observers will be on edge for the decade-long celebrations of the “Belt and Road Initiative,” the title under which it falls. China It has bragged on its bridges Mozambique ports in PakistanLooking for signs of intent.
The real difficulties at home would also change the way he sees the world China. Rapid growth, along with generous borrowing, has boosted the country’s reputation. This is according to a recent survey conducted by the Center for Opinion Polling pew In 24 countries, people in wealthy locations had a generally negative view China. In much of the emerging world, the picture was different: Mexicans, Kenyans, Nigerians, and South Africans viewed China in a better light and welcomed Chinese investment. The question is whether this will still be the case a year later.
© 2023 The Economist Limited. All rights reserved.