China slowdown could halve world growth

Staff reporter Residential units under construction in the mainland, where the property market is slowing down

Oxford Economics has published a report assessing the potential global ramifications of a slowdown in China’s economic growth, indicating 46 other economies that would likely be affected. The group has identified the countries that would be most exposed if a slowdown does occur in its report entitled “China-pedia – one hard landing, 46 economies.”
The global effects of what the group terms a “hard landing” for the Chinese economy could include a catastrophic deceleration in world growth. This growth has been forecast to drop from 3 percent to as low as 1.7 percent in 2016, which almost halves today’s world GDP growth rate and demonstrates just how deeply linked China’s performance is to that of the world economy.
Emerging markets and commodity producers and exporters would probably be hit the worst, according to the report. Amid a slackening global demand, commodity prices would likely fall and deflationary pressures increase, adding to debt sustainability concerns.
The analysis makes clear, however, that more mature economies would also experience negative growth and a subsequent drop in their Gross Domestic Product (GDP). Hong Kong, Singapore and Korea could suffer a 3 percent hit to their GDP.
The U.S. and European countries would be the least impacted by the China slowdown, and could keep their modest growth rates intact.
The implications of a potential slowdown could lead some countries to reconsider their monetary policies. However, the ability and willingness of a country to enact such policies where necessary varies across the globe. In some countries, the report says, monetary policy is constrained by concerns over sharp capital outflows, exchange rate depreciation and ensuing inflationary pressures.