CHINA, an ancient civilisation, is still in its economic adolescence, a phase marked by growth spurts and mood swings. Other emerging economies endure this awkward period in relative obscurity, attracting only cursory attention. China has no such luck. It has become big before becoming rich, inviting scrutiny typically reserved for mature economies.
China may not be a member of the G7 group of big, rich democracies. But it is already a member of the so-called S5, or Systemic Five, a group of economies subject to extra IMF attention because of their “systemic” significance. China, according to the fund, is the most “central” trading power in the world, based on its extensive trade links to other economies that are themselves tightly interwoven. It is the biggest or second-biggest trading partner for 78 countries. Its appetite for imports, especially the base metals and oil that feed its vast industrial machine, flatters the exports of countries as far afield as Azerbaijan and Angola.
A hard landing would hobble South Korea and bring Taiwan’s growth to a shuddering halt. But growth in Brazil and Australia would hold up surprisingly well, perhaps because their currencies would fall, absorbing some of the shock. However, these estimates capture only the direct impact of a Chinese slowdown, as transmitted through its trade links. Messrs Ahuja and Nabar point out that stockmarkets around the world would also swoon. And some countries would be hit by indirect effects: Germany, for example, would suffer both a loss of exports to China and to countries that sell a lot to China. Adolescents have an uncanny ability to spoil things for everybody.