If the past six months’ economic news has taught the world one thing, it is that a bump in China’s economy cannot be ignored. The question is whether the rest of the world feels a ripple or a tsunami.
Now the world’s largest economy, measured by the quantity of goods and services produced, the IMF expects China to account for almost 18 per cent of world economic activity in 2016. This implies that the drop in its growth rate from an expansion of more than 10 per cent in 2010 to 6.3 per cent expected this year has directly knocked about 0.75 percentage points off the global growth rate.
The spillover effects are broader than this direct calculation of China’s importance. Maury Obstfeld, the IMF chief economist, has said he is most worried about these knock-on effects in 2016. “The global spillovers from China’s reduced rate of growth . . . have been much larger than we would have anticipated,” he said this week.