What China’s economic troubles mean for the world

ONLY eight months ago, China’s economy was expected to roar back to life. The zero-Covid policy had been abandoned; the country’s shoppers and tourists were allowed to roam free. Yet the hoped-for rebound has fizzled out. Gross domestic product (GDP) growth, which some economists had expected to hit an annualised rate of 10 per cent in the second quarter of the year, instead struggled to just over 3 per cent. The economy has tumbled into deflation. A strangely slow official response, and a property crisis that is going from bad to worse, have provoked fears of a prolonged downturn.

What happens in the world’s second-largest economy matters everywhere else. Because China is so big, its changing economic fortunes can drive overall global growth figures. But a slowing China also directly affects other countries’ prospects. Its households and companies will buy fewer goods and services than they would have otherwise, with consequences both for the producers of these goods and the other consumers of them. In some places, China’s difficulties will be a source of pain. In others, though, they will bring relief.

Commodity exporters are especially exposed to China’s slowdown. The country guzzles almost a fifth of the world’s oil, half of its refined copper, nickel and zinc, and more than three-fifths of its iron ore. China’s property woes will mean that it requires less of such supplies. That will be a knock for countries such as Zambia, where exports of copper and other metals to China amount to 20 per cent of GDP, and Australia, a big supplier of coal and iron. On Aug 22, BHP, an Australian company and the world’s biggest miner, reported its lowest annual profit in three years, and warned that China’s stimulus efforts were not producing changes on the ground.