Most economic forecasts suggest that a recession in China will hurt everyone, but that the pain would be more regionally confined than would be the case for a deep recession in the United States. Unfortunately, that may be wishful thinking.
CAMBRIDGE – When China finally has its inevitable growth recession – which will almost surely be amplified by a financial crisis, given the economy’s massive leverage – how will the rest of world be affected? With US President Donald Trump’s trade war hitting China just as growth was already slowing, this is no idle question.
Typical estimates, for example those embodied in the International Monetary Fund’s assessments of country risk, suggest that an economic slowdown in China will hurt everyone. But the acute pain, according to the IMF, will be more regionally concentrated and confined than would be the case for a deep recession in the United States. Unfortunately, this might be wishful thinking.
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WNU Editor: A Chinese recession would result in the following. A massive oil price decline due to lower rates of consumption from China. A slowing Chinese economy will mean the drying of export markets, and countries that are dependent on exporting resources to China (which is everyone) will be particularly hit. There will also be damage from spiking interest rates, ending the era of cheap money that many in the West have gotten use to, specifically Western governments who will no longer be able to find their programs due to high debt costs. But the biggest impact will be within China itself. The people in China have high expectations that life will get better for them. If that is taken away from them .... watch out .... when people have their hope taken away they will rebel, and I know from experience that the Chinese Communist Party gets very nervous when they feel that they are losing control.
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