Spillovers From China’s Malaise

A hard landing in China would rattle Asian economies.

There is an old cliché that if the U.S. sneezes, the world catches a cold. It is used to highlight the spillover effects of trends in the world’s largest economy upon other parts of the world.

With China’s rise as an industrial powerhouse, developments there have broad global consequences. But I would propose an alternative cliché: when China’s economy feels the heat, the world sweats.

After four decades of robust performance, China’s economic growth is slowing and the soft patch is unlikely to be transitory. As we wrote here and here, the Chinese economy faces a series of challenges that will be difficult to manage.

China has become a dominant worldwide player across a number of sectors. The country is the world's largest manufacturer and exporter of goods. Supply chains for many industries are rooted in the country, earning it the title of the world’s factory. China is also the world's largest purchaser of several key commodities, consuming about half of the global supply of basic metals and one-fifth of the global oil supply.

Shares of total goods exports headed to China