If China Stalls, Here’s Who Is Most Exposed
Countries with strong trade ties are the most vulnerable to a slowdown
By Ian Talley
The risk of China’s economic slowdown morphing into something far more dangerous has rattled markets for the last two years.
Who’s most exposed?
While Beijing’s recent efforts have temporarily stabilized the economy, many warn trouble is still brewing ahead. The government’s slow-walking of economic overhauls, continued reliance on stimulus to subsidize manufacturing, and the failure to rein in a worrisome surge in credit all could lead to a reckoning in the not-too-distant future.
“Just as China fostered strong global-trade growth during the expansion, its transition is likely playing a role in the current slowdown,” says the International Monetary Fund. If growth slows much faster, it could shake the global economy.
Countries with strong trade ties are the most vulnerable. Besides pushing prices back into a funk, a stalled Chinese economy would see demand from the world’s second-largest economy plummet.
Commodity exporters that rely heavily on Chinese demand would be hit with a double punch.
Asian countries, given their proximity, are some of the most prone to trouble. Mongolia, for example, is in talks with the IMF for an emergency bailout after the economy collapsed in the wake of China’s surprisingly fast deceleration and associated commodity-price fall. But many African nations are also susceptible after building heavy trade relationships with the Asian powerhouse. Angola’s economy, like several others on the continent, is on the verge of crisis.
But the effects would be global given how many countries rely on exports to China.