China’s downshifting economy is likely to clip just a few tenths of a percentage point off global growth, economists said.
To be sure, a prolonged downturn in China — or one that is deeper than expected — would be felt around the world. First to suffer would be major commodity producers. The Chinese economic miracle for decades has vacuumed up copper from Peru, ore from Australia, soybeans from Brazil and oil from Saudi Arabia and Russia.in recent years, amid a trade war and rising geopolitical tensions.
China’s neighbors are already feeling a chill. But their decline in exports to China is primarily the result of American consumers buying fewer electronics than they did during the work-from-home phase of the pandemic rather than a consequence of Chinese domestic weakness.China sits at the center of a pan-Asian electronics supply chain, assembling products with components shipped there from South Korea, Malaysia, Thailand and Taiwan.
Now, the outlook is less rosy. China grew in the second quarter at an annual pace just above 3 percent, a far cry from the roughly 9 percent rate it averaged over its first three decades of economic reform. Its aging labor force is shrinking, and Xi emphasizes loyalty to the Communist Party rather than expanding the economy.
“Countries that run a trade surplus basically subtract more from global growth than they contribute,” said George Magnus, an economist at Oxford University’s China Center. “It’s doing more for its own growth than it’s contributing.”Exports have been a central ingredient in China’s economic strategy for decades. Government officials have repeatedly spoken of promoting domestic consumption.
“They’re structurally in a deep hole that they’re going to have a lot of difficulty climbing out of,” said Andrew Collier, the managing director of Orient Capital Research in Hong Kong.
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