China's economy has bunt the question is
whether the rest of the
gentle ripple or a tidal wave now China
is more than just a cog in the global
economy no one should underestimate its
ability to affect us all but how at
eighteen percent of the world economy
China is the second largest importer on
earth neighbors such as Japan and South
Korea are deeply dependent on its
success Germany is at risk as a producer
capital goods and commodities
specialists such as Australia rely on
coal and iron ore exports pain here will
hurt but it's rarely decisive and
although China's currency has gone down
six percent against the US dollar this
is no currency war the remnant be has
modestly risen against most of its main
trading partners China worries have
helped drag brent crude down to a fresh
11-year low below thirty three dollars a
barrel pity Russia Brazil the Gulf
states and suppliers to the oil and
commodity sectors but low commodity
prices mostly redistribute income rather
than damage economic prospects producers
lose consumers gain the IMF still thinks
the net effect of lower commodity prices
is positive for the global economy
a China slowdown weakens inflationary
pressure around the world at worst a
deflationary spiral would cut incomes
and make debts unpayable that's worrying
but low inflation also gives
policymakers additional leeway to keep
monetary policy loser for longer so
there is a silver lining the pernicious
effect of confidence has the greatest
potential to shock if China's troubles
persuade companies to ditch investment
and households to tighten their belts
the global economic outlook can change
radically for the worse 2008 taught
everyone that once confidence has gone
companies banks markets and the
financial system are all vulnerable so
gentle ripple or tidal wave that depends
most on whether the rest of us panic