China’s worsening economic slowdown is rippling across the globe
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." Global investors have already pulled more than $10 billion from China’s stock markets, with most of the selling in blue chips.
Goldman Sachs Group Inc. and Morgan Stanley have cut their targets for Chinese equities, with the former also warning of spillover risks to the rest of the region. Asian economies are taking the biggest hit to their trade so far, along with countries in Africa.
Japan reported its first drop in exports in more than two years in July after China cut back on purchases of cars and chips. Central bankers from South Korea and Thailand last week cited China’s weak recovery for downgrades to their growth forecasts. 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. Some emerging markets like India also see opportunities, hoping to attract the foreign investment that may be leaving China’s shores.
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