China’s growing economic slowdown is causing worldwide ripple effects. It was initially predicted to drive a third of global economic growth this year, but its recent dramatic decline has sparked global concerns.
Chinese imports, from construction materials to electronics, are decreasing, leading to over US$10 billion being withdrawn from Chinese stock markets and lowered targets for Chinese stocks by Goldman Sachs and Morgan Stanley.
Asian and African economies are the most impacted.
Japan saw its first export decline in over two years, and South Korea and Thailand lowered their growth forecasts due to China’s weak recovery.
However, there are benefits: China’s slowdown lowers global oil prices and causes deflation, which decreases worldwide goods prices, helping countries battling high inflation, like the US and UK.
Emerging markets like India hope to attract foreign investment leaving China. Yet, a prolonged Chinese slowdown will ultimately harm the global economy.
IMF analysis shows a one percentage point increase in China’s growth boosts global expansion by 0.3 percentage points.
Peter Berezin of BCA Research notes that China’s deflation is not so bad globally, but if the US and Europe fall into a recession while China remains weak, it would be problematic for the entire global economy.
The slowdown affects trade declines, deflationary pressure, tourism recovery, currency impact, bond attractiveness, and luxury stocks.
Companies with high China exposure, like LVMH, Kering SA, Hermes International, Nike Inc., and Caterpillar, are seeing earnings impacts.
Ultimately, China’s economic slowdown consequences are multifaceted and far-reaching, affecting the entire world.