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U.S. NEWSTuesday 25 August 2015
China’s tremors may weaken US, other major economies
PAUL WISEMAN A man carrying toys waits in line with others near a cashier counter at a shopping mall in Beijing. pectedly devalued China’s
DAVID McHUGH China is exporting something new to the world economy: fear. Global financial markets are quak- currency, the yuan. Author-
AP Business Writers ing over the prospect of a severe slowdown in the world’s second-biggest economy. ities explained that they
WASHINGTON (AP) — Chi- wanted to catch up with
na is exporting something (AP Photo/Andy Wong) investor sentiment, which
new to the world economy: suggested that the yuan
Fear. activity are “all looking very ter all, a 1 percent annual economy and the financial was overvalued from hav-
Global investors are quak- weak,” Kelly notes. drop in China’s economy market.” ing been linked to a rising
ing over the prospect of a “Everybody felt they could translates into just a 0.2 per- Beijing had cushioned its U.S. dollar.
devastating slump in the slow down to about 7 per- cent pinch to America’s economy during the 2008- Skeptics worried that the
world’s second-biggest cent (annual growth) and economy, according to 2009 financial crisis by or- devaluation was instead a
economy. And they’re fast that wouldn’t be the end Mark Zandi, chief econo- dering state-owned banks desperate move to bail out
losing confidence that Chi- of the world,” says Sung mist at Moody’s Analytics. to ply companies with China’s struggling export-
na’s policymakers, seem- Won Sohn, economist at Likewise, a China pullback loans to build roads, houses ers: A weaker yuan gives
ingly so sure-footed in the California State University of that size would slow an- and factories. The result: Chinese goods a price
past, know how to solve the Channel Islands. “It looks nual growth in the 19-coun- An escalation of corporate edge in foreign markets.
problem. like it’s slowing down even try eurozone by only 0.10 debt that’s now feeding In the aftermath, pain from
The worst-case scenario is beyond that.” percent to 0.15 percent, the problems. slower Chinese growth
that a collapsing Chinese Big American companies according to UniCredit Re- The Chinese authorities and a weaker yuan could
economy would derail such as Caterpillar and search. also made the misguided spread. Oxford Economics
others around the world Chevron have acknowl- That sort of slowdown is decision to talk up stock calculates that a 10 per-
— from emerging markets edged the damage that hardly catastrophic. prices, encouraging inex- cent drop in the yuan this
in Chile and Indonesia to China’s troubles are caus- So why the hysteria? perienced investors to buy year would reduce South
industrial powers such the ing them. China’s troubles For one thing, China’s trou- shares. The idea was that Korea’s growth in 2016 by
United States, the Europe- have also depressed sev- bles raise doubts about companies could issue 1.16 percent and Indone-
an Union and Japan. eral technology stocks. whether its policymakers stock into a rising market sia’s 0.32 percent.
The free-fall in the stock Shares in Apple, which has have the tools to keep their and use the proceeds to Slowing industrial output
markets, in the words of Da- enjoyed strong sales of economy growing at a reduce their debts. and construction in China
vid Kelly, chief global strat- iPhones and other prod- healthy pace — something But stocks rose to unsustain- means less demand for
egist at JP Morgan Funds, is ucts in China, are down that’s been a reassuring able levels and crashed. Chilean copper, Australian
“Made in China.” nearly 20 percent the past constant for more than two The government has since coal and Brazilian iron ore.
This year, the International five weeks. decades. been trying in vain to clean It also squeezes Taiwan and
Monetary Fund expects On the surface, at least, Recently, Sohn says, “The up the mess. South Korea, which make
China’s economy to grow the panic on Wall Street Chinese government has The latest trouble started components Chinese fac-
6.8 percent, which would might seem overdone. Af- not been able to control its Aug. 11, when Beijing unex- tories use to assemble
be its weakest peace since electronics, cars and other
1990. products. Also suffering is
China, which was posting Japan, which sends about
double-digit growth in the a fifth of its exports to Chi-
mid-2000s, is trying to engi- na.
neer a daunting transition The possibility of a worse-
— from overheated growth than-expected Chinese
fueled by exports and of- downturn has also raised
ten-wasteful investment to worries in Europe, now in
slower growth built on con- a fragile recovery. The im-
sumer spending. pact will depend on just
Official numbers show the how bad the slowdown
Chinese economy grew turns out to be. A severe
7 percent from January downturn — to, say, 3 per-
through March from a year cent annual growth —
earlier. Yet there’s growing could cost Europe 1 to 2
suspicion that Beijing’s sta- percentage points in lost
tistics are failing to capture economic output cumula-
the extent of the slowdown: tively over five years.q
Auto sales, electricity con-
sumption and construction
