Weak China growth could affect global monetary policy

THE global impact of a China economic slowdown is mainly transmitted through its trade links with the rest of the world, as its financial linkages remain limited. Most of the impact will come from China's commodity trade, which will have a far-reaching implication on global monetary policy.

Clearly, the more a country exports to meet China's domestic demand, the larger the negative impact on its growth momentum should China's growth slow down. The country's exports through China to a third-party country should not affect its growth if the third-party's market demand does not change.

Asian countries will feel the biggest China impact as they have the largest export exposure to Chinese domestic demand, accounting for 5 to 7 per cent of their respective gross domestic product (GDP).