What China’s economic troubles mean for the world
tumbled into deflation. A strangely slow official response, and a property crisis that is going from bad to worse, have provoked fears of a prolonged downturn. What happens in the world’s second-largest economy matters everywhere else.
Because China is so big, its changing economic fortunes can drive overall global growth figures. But a slowing China also directly affects other countries’ prospects. Its households and companies will buy fewer goods and services than they would have otherwise, with consequences both for the producers of these goods and the other consumers of them.
In some places, China’s difficulties will be a source of pain. In others, though, they will bring relief. Commodity exporters are especially exposed to China’s slowdown.
The country guzzles almost a fifth of the world’s oil, half of its refined copper, nickel and zinc, and more than three-fifths of its iron ore. China’s property woes will mean that it requires less of such supplies. That will be a knock for countries such as Zambia, where exports of copper and other metals to China amount to 20% of GDP, and Australia, a big supplier of coal and iron (see chart 1).
On August 22nd bhp, an Australian firm and the world’s biggest miner, reported its lowest annual profit in three years, and warned that China’s stimulus efforts were not producing changes on the ground. Weak spots in the West include Germany (see chart 2). Faltering demand from China is one reason why the country’s economy has stagnated of late.
And some Western firms are exposed through their reliance on the country for revenues. In 2021 the 200 biggest multinationals in America, Europe and Japan made 13% of their sales in China, earning $700bn. Tesla is more exposed still, making
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