How China’s slowing GDP growth could drag down the global economy
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Version 0 of 1. China's rise to global economic superpower was accompanied by plenty of scaremongering about what might happen when the West hands over the reigns to the East. While China is still growing, it's growing at a much slower pace, and talk has turned to the possible impact of a slowdown. Figures for the first quarter of 2015 show Chinese growth is at its slowest in six years. GDP growth was 7 per cent for the three months from January, down from 7.3 per cent in the fourth quarter last year. The slowdown is nothing new: the 7.3 per cent GDP growth last year was the lowest in two decades. China’s economic output is still enormous at $10.3 trillion last year, making it only the second country to the $10 trillion milestone that the US met in 2000. But the International Monetary Fund says that slowing growth in China could cause major problems for the global economy. The IMF has slashed growth forecasts in China - and globally. The recent estimate of 2015 growth is 0.3 per cent lower than it was last year. For 2016 forecasts, growth is 0.5 per cent lower. If Chinese industry production slows 1%, commodity prices are hit Source: World Bank Slower Chinese growth has a knock-on effect on demand for oil. If there is a one percentage point decline in the growth of China's industry production, the oil price can drop almost two per cent lower than expected. That will do little to improve the volume of world trade, which has also been revised down by the IMF. If Chinese industry production slows 1%, trading partners take the hit Source: World Bank
Lower than expected growth can have serious consequences for emerging markets (EM) more than advanced markets (AM), according to World Bank estimates. If growth is one per cent lower than expected in China, it can knock half a point off global growth. |