Global impact of a slowdown in China

Abstract

Given its systemic importance, a sharp and sustained economic slowdown in China affects the world economy, not only on account of its share of global GDP, but also because of its links with other economies through trade, the commodities markets and, on a more incipient level, the global financial system. Developments in China also have indirect effects on global uncertainty and confidence. This article presents various simulations of the negative impact that a sharper slowdown in the Chinese economy than expected by the main analysts would have on the global economy and, especially, on the euro area. Specifically, a further slowdown in annual growth of 1 pp in China would give rise to a decline in global growth of 0.4 pp in a year, with particularly marked effects on commodities producers and on the Asian economies.