Alarms bell ring whenever there are reports that China’s economy is slowing down. So it comes as no surprise that investors were thrown through a loop on Monday when China revealed that its economy grew at its slowest pace since the early 1990s.
And this one chart shows why slowdown in the world’s second largest economy, behind the US, is dangerous for the rest of the globe.
In a report by major consultancy McKinsey and Company, the chart reveals how as the world has been ramping up its exposure to China but the country has been scaling back. That means that when the Chinese economy slows, it will affect overseas investors a lot more than China.
The McKinsey report outlines some key facts:
Asian economies are tightly linked with China through regional supply chains
Resource rich countries are highly exposed to Chinese demand
Some emerging and smaller mature economies are highly exposed to Chinese investment
China’s economic growth rate slowed from 6.4% in the first three months of the year, by growing to just 6.2%. While this is in line with forecasts, it certainly shows that there could be tough times ahead for investors.
China has been trying to stimulate its economy by boosting spending and delivering tax cuts while at the same time battling a trade war with the US.
This in turn has hurt growth and businesses due to the tit-for-tat increase in tariffs.