And worries of a hard landing, or a sudden drop to below 6% full-year growth, are coming back too.
China is a major source of global demand, with imports equivalent to 30% of GDP, Societe Generale Michala Marcussen points out in a new report. So a hard landing would have a major impact on economies that are reliant on China for their exports.
“Drawing on different studies, mainly from the IMF and the OECD, we estimate that the impact of the trade channel from the type of hard landing in China described in the previous section would cut GDP growth by around 4.5pp in Taiwan, 2.5pp in South Korea and Malaysia, 1.2pp in Australia, 0.6pp in Japan, 0.2pp in the euro area and 0.1pp in the US. For the global economy ex-China, the trade channel effects would bring about a reduction of around 0.6pp to GDP growth.”
There’s also the impact of the decline in investment, since “investment has significantly higher import content than consumption, most notably through commodities and machine tools.”
Here’s a look at the countries that would be hit the hardest by a slowdown in China:
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