- ‘China-dependence’ is no new phenomenon in the global economy, but its importance has been reinforced in the past few months. Back in March, Citi expected 24% of global GDP growth to be generated by China in both 2011 and 2012. Our forecasts now show this contribution rising to 28% this year, and to 30% next year.
- China, in turn, has become increasingly reliant on investment spending to deliver GDP growth, which reflects the way in which the exceptionally large credit stimulus was implemented after the Lehman crisis. This has caused an upward shift in China’s share of global commodities consumption.
- The credit stimulus remains substantial, and appears to create something of a virtuous circle: since credit extension remains high, so does investment spending; and since investment spending remains high, so does GDP growth; and since GDP growth remains high, asset quality in the financial sector remains healthy-looking. Yet the recent decline in the marginal efficiency of investment spending raises some questions about how easily this virtuous circle can be sustained.
- On the face of it, China seems less vulnerable to an external shock than it was pre-Lehman, since net exports are making a much smaller contribution to GDP growth than they used to — another consequence of the credit stimulus. Yet China’s vulnerability to global slowdown shouldn’t be underestimated: total exports account for more than a quarter of GDP and the export sector employs a big army of labor.
- China has plenty of room to deliver new stimulus measures, both fiscal and monetary. But the efficiency of additional credit stimulus may be weaker than it was post-Lehman; and it might take a shock to asset prices in order for the Chinese authorities to put stimulus measures in place.
- In view of these risks, we put together a very simple framework to help investors think about what economic contagion risks might result from a sharp China slowdown. But this is tentative. Absence of the Chinese engine for global GDP growth would contain very broad risks.
Temas de relações internacionais, de política externa e de diplomacia brasileira, com ênfase em políticas econômicas, em viagens, livros e cultura em geral. Um quilombo de resistência intelectual em defesa da racionalidade, da inteligência e das liberdades democráticas.
O que é este blog?
Este blog trata basicamente de ideias, se possível inteligentes, para pessoas inteligentes. Ele também se ocupa de ideias aplicadas à política, em especial à política econômica. Ele constitui uma tentativa de manter um pensamento crítico e independente sobre livros, sobre questões culturais em geral, focando numa discussão bem informada sobre temas de relações internacionais e de política externa do Brasil. Para meus livros e ensaios ver o website: www.pralmeida.org. Para a maior parte de meus textos, ver minha página na plataforma Academia.edu, link: https://itamaraty.academia.edu/PauloRobertodeAlmeida.
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