Home Finance Global Impact of China’s Slowdown

Global Impact of China’s Slowdown

by internationalbanker

By Cary Springfield – cary.springfield@internationalbanker.com

Policymakers all over the world are now anxious about the likely impact of the continued and prolonged Chinese economic slowdown. In 2013, the Chinese economy grew by 7.7 percent, its worst rate since 1999. This is considered to be the result of China’s effort to curb shadow banking and to enforce environmental regulations.  While the US isn’t worried, the eurozone is keenly watching the situation, and the other countries in the Asia-Pacific region, such as Japan, South Korea and Australia, are preparing to cope with likely severe impacts. For many African countries, exports to China are critical for sustained growth.

Australia

More than 30 percent of Australia’s exports are consumed by China. These exports include iron ore, coal, coal briquettes, copper, nickel, cereals, meat, wool, fur skins and hides; they could suffer as a result of the slowdown. With the global recovery still very slow, Australia may find it difficult to discover new markets for its increasing exports. Export prices of some of its commodities are already being impacted by the slowdown.

As of late April this year, Australia has entered into trade treaties with Japan and South Korea in an effort to overcome the impact of China’s slowdown.

Japan and South Korea

Japan exports primarily electronic equipment, machinery, pumps, medical electronic equipment, automobiles, chemicals, plastics, copper, steel and ferrous products to China. This amounts to 8 percent of China’s imports and 20 percent of Japan’s overall exports.

South Korea’s dependence on China amounts to approximately 29 percent of its export trade. Exports comprise electronic goods and components, medical and surgical equipment, mechanical equipment, engines, chemicals, oils, auto parts and products, steel products and copper.

The Worst Sufferers

Countries such as Mauritania, Turkmenistan, Sierra Leone, Gambia, Mongolia, Mali, Solomon Islands, depend on China to purchase more than 50 percent of their exports. Their economies are much more vulnerable to the economic growth problems of China than most.

African Distress

The Chinese slowdown has the potential to damage the economies of Sub-Saharan countries, which are showing signs of growth on the strength of demand for minerals and other natural resources, predominantly from China.

Commodity prices for goods such as copper and iron ore are already under strain, while coffee and cocoa prices will not be affected, as Chinese demand continues to grow strongly for these products.

Ghana, Uganda and Rwanda are also benefiting from firm coffee and cocoa prices. The outlook for ores of iron and copper are not as encouraging as industrial production is not growing at the previous rate.

Brazil

Brazil exports iron ore, copper, slag, wood pulp, sugar, rawhides, animal fats, meats. Industrial-input materials such as copper and iron ores are likely to face a downturn. Exports to China constitute 19 percent of its total.

Southeast Asia

For Thailand, exports consist of machinery, electronics, fruits, nuts, vegetables, wood, rubber. Even though these account for only 2 percent of China’s imports, they are critical for Thailand’s economy. Similarly, Indonesia exports primarily oil, minerals, rubber, wood, pulp, animal fats and electronic equipment, and may be moderately affected by the downturn.

Malaysia’s exports to China account for 15 percent of its export economy. They consist mainly of oil, electronic-integrated circuits and palm oil. Singapore’s exports make up 1.5 percent of Chinese imports, and the country has a diversified portfolio.

Other Regions

The US, Canada, the UK and France export aircraft, space equipment, machinery, electronic equipment and vehicles to China. US exports to China constitute a significant 9 percent of its export trade and 8 percent of total Chinese imports.

German exports account for 6.5 percent of total German export trade and 4.8 percent of overall Chinese imports. They comprise engines, machines, mechanical parts, pumps, automobiles, electronic and medical equipment, pharmaceuticals, spacecraft, copper, ferrous and steel products, chemicals. Along with Germany, Switzerland, too, is a major European exporter of machinery and equipment to China. Its exports constitute 3 percent of Chinese imports. Both Germany and Switzerland will be moderately impacted by China’s slowdown.

The UK’s exports to China comprise spacecraft vehicles as well as mechanical, electronic and medical equipment 

Chinese imports from Russia and Saudi Arabia comprise mainly oil, and they won’t be affected by the slowdown.

While the UK and some nations of Western Europe are optimistic about their own economic recoveries, the eurozone and the rest of the world have yet to share their optimism. The inevitable slowdown of China is a negative factor for most countries of the world, and only a faster pace of recovery in Europe and the US will play a stabilizing role. 

Leave a Comment

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.