One by one, the global economy dominoes are falling, and one of the most important, China, is beginning to wobble. Per the NYT, the recent signs include:
- Chinese factory orders registered a month-on-month decline, an almost unprecedented event in recent Chinese economic history
- Export orders are slowing
- Real estate prices are tumbling, especially in the southeast (Shenzhen).
- Stock markets down 50%+
- GDP growth may slow to 9% or 9.5% next year, according to economists
A 9% growth rate would still be torrid, but it’s also likely a hallucination. If China’s supertanker is slowing, next year’s growth will likely be a lot slower than 9% (Economies don’t usually simply cool: they call it a “business cycle” for a reason). Vulnerable to political instability as a result of a huge and restive migrant worker population, China also needs a fast growth rate to keep its huge population employed and content.
So what could a slowdown mean for the rest of the world? The loss of a major emerging market. Now that the US and Europe are headed into the tank, many big Western companies have placed their bets on growth in China and other emerging markets. If China slows, earnings for a lot of these companies will lost yet another growth engine.
On the plus side, however, sky-high Chinese demand for metals and energy has helped fuel the commodity boom, and slower Chinese growth could cause bigger drops in commodity prices and bring some relief at the pump and elsewhere.
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