China’s economy was meant to drive a third of global economic growth this year, so its dramatic slowdown in recent months is sounding alarm bells across the world.
Policymakers are bracing for a hit to their economies as China’s imports of everything from construction materials to electronics slide. Caterpillar Inc. says Chinese demand for machines used on building sites is worse than previously thought. U.S. President Joe Biden called the economic problems a “ticking time bomb.”
It’s not all doom-and-gloom, though. China’s slowdown will drag down global oil prices, and deflation in the country means the prices of goods being shipped around the world are falling. That’s a benefit to countries like the US and UK still battling high inflation. China’s deflation “isn’t such a bad thing” for the global economy, Peter Berezin, chief global strategist BCA Research Inc., said in an interview on Bloomberg TV. “But, if the rest of the world, the US and Europe, falls into recession, if China remains weak, then that would be a problem — not just for China but for the whole global economy.”Trade Slump
Africa and Asia have been the hardest hit, with the value of imports down more than 14% in the first seven months this year. Part of that is due to a drop in demand for electronics parts from South Korea and Taiwan, while falling prices of commodities such as fossil fuels are also hitting the value of goods shipped to China.So far, the actual volume of commodities such as iron or copper ore sent to China has held up.
The weak sentiment spillover may weigh on currencies like the Singapore dollar, Thai baht, and Mexican peso as correlations rise, according to Barclays Bank Plc.
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