2023/Q4 Article 06. The potential global effects and transmission channels of a slowdown in Chinese growth
Series: Economic Bulletin.
Author: Irma Alonso, Daniel Santabárbara and Marta Suárez-Varela.
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Summary
Rationale
Having picked up following the end of the zero-COVID policy, Chinese economic activity is now slowing. This comes against a backdrop of, inter alia, increased uncertainty related to difficulties in the domestic real estate sector. This article examines and quantifies the different channels through which a potential slowdown in the Chinese economy could affect activity and inflation levels in the world’s major economies.
Takeaways
- A growth slowdown in China, partly linked to problems in its real estate sector, could pose a downside risk to activity levels in the world’s major economies.
- This impact would be felt, with varying intensity, through various channels: trade, commodities and international financial markets.
- In the euro area, a temporary slowdown in Chinese economic activity of 1 percentage point (pp) would reduce GDP growth by 0.1 pp in the first year, while lowering inflation by 0.4 pp.