China’s economic stumbles may trip up world
WASHINGTON — China’s roaring economy for years has pulled much of the rest of the world with it, soaking up oil, iron ore and other commodities from developing countries, and vehicles and luxury goods from Europe.
But its role as a global engine is fading as its economy slows — and many other nations, in the view of economists, will feel the pain. An Associated Press survey of 30 economists has found that 57 percent of them expect China’s decelerating economy to restrain growth in countries from Brazil and Chile to Australia and South Korea.
A notable exception is the United States, which the economists believe is largely insulated from China’s troubles.
China’s once-explosive growth has slowed, in part, because of its government’s efforts to restrain its speculative real estate sector and shift its economy toward consumer spending.
China’s economy expanded 7.3 percent in the third quarter from a year earlier, its slowest pace since 2009. A growth rate above 7 percent would be the envy of most major economies. But for China, it marked a sharp slowdown after three decades of double-digit expansion.
Last week, the Conference Board, a business group, forecast that China’s growth would slump to 4 percent by 2020.
China’s deceleration is rippling around the world. Brazil and Australia are selling it less iron ore, a key ingredient in steel, as China’s construction boom slows. Chile is exporting less copper to China, and Indonesia is selling it less oil and lumber.
South Korea’s electronics exports have faltered, hampering its growth, as Chinese consumers buy fewer smartphones or choose cheaper domestic options.
China is cracking down on corruption, which threatens European designer brands.
Sung Won Sohn, an economist at California State University’s Smith School of Business, estimates that one-third of luxury Swiss watches are exported to China. In addition, China is the fastest-growing market for Mercedes-Benz and BMW.
American automakers, particularly General Motors, sell lots of cars in China. But nearly all are built in China and don’t contribute much to the U.S. economy, Sohn said. That’s true of many other American goods sold in China, including electronics. As a result, weaker sales in China wouldn’t much hurt the United States.
Forecasting firm Capital Economics calculates that only 6.5 percent of American exports go to China — the equivalent of just 0.9 percent of the national economy.
“It’s hard to see a slowdown in China having a really significant impact on the U.S. economy, barring a complete collapse,” said Paul Ashworth, an economist at Capital Economics.
On Friday, Japan’s central bank unexpectedly intensified its stimulus efforts to try to invigorate its chronically anemic economy. The Bank of Japan will buy more government bonds and other assets lift inflation and spur more spending. That announcement helped lift financial markets around the world.
Oil prices have fallen more than 25 percent since summer, partly because China is using less of it, thereby reducing global demand. With demand slowing, the national average price of gasoline in the United States fell 33 cents in October to $3.00 even, according to AAA. The average dipped below $3 last weekend for the first time in four years.
Most of surveyed economists think the U.S. economy can expand at a respectable annual rate of 2.5 percent to 3 percent through next year, even if Europe, Japan and China falter.
But if China’s growth slows significantly, eventually it could diminish growth in the United States, analysts admit.
“China is such a big market,” Sohn said. “Sooner or later, we will feel the impact.”
The AP surveyed a range of corporate, Wall Street and academic economists from Oct. 24 to 29.