Which countries will fare worst from a Chinese slowdown?

by on March 14, 2014 at 2:42 pm in Current Affairs, Economics | Permalink

If you want to look at some good tables ranking the vulnerability of emerging countries to China, you could do worse than check Craig Botham of Schroders’ views summarised at http://blogs.ft.com/beyond-brics/2014/03/13/ranking-em-vulnerability-to-china/#axzz2vlzb3Xby. According to this, Chile, Columbia, Russia, South Africa and Peru are the most exposed, but few countries in Asia get off lightly, or Brazil for that matter. And while Australia doesn’t figure, of course, Perth should. And because of other concerns people have about the lack of demand in Australia ex-Perth, creeping weakness in employment,  and looming instability in housing and mortgage markets, this is definitely a ‘watch-this-space’.

Looking at copper, half of China’s usage is accounted for by infrastructure and construction, and a further third by consumer and industrial goods. To the extent this reflects China’s development model, i.e. with an emphasis on fixed investment and exports, respectively, it is clear that economic rebalancing away from these sectors to household goods and services must entail a significant fall-out in terms of the commodity intensity of growth.

China’s consumption of other commodities also accounts for a hefty share of global production, though not as large as for base metals. In the case of non-renewable energy resources, the proportion is 20%, and for major agricultural crops, it’s 23%.

That is from George Magnus.

Ray Lopez March 14, 2014 at 3:36 pm

Dr. Copper. Just remember that predictor.

collin March 14, 2014 at 4:26 pm

I wonder if Dr. Cooper does what gold did last year with India’s rupee falling. As the ruppee fell the demand for Gold decreased. As less gold bought, the price in dollars took a sudden drop. (I know there were other factors but I assumed this was the reason Gold stayed around $1,300 from $1,700.)

So if China Yuan falls the price of copper for Chinses Yuan increases which lowers demand. So the price of copper in dollar falls even further.

Roy March 14, 2014 at 4:51 pm

Copper serves a very different function in the Chinese economy than gold does in the Indian.

Mark Thorson March 14, 2014 at 6:48 pm

Lower demand for copper should be good for silver prices. A lot of the silver that comes onto the market every year is a by-product of the electrolytic refining of copper. The sludge that collects in the bottom of the tanks is very rich in silver.

Z March 14, 2014 at 3:48 pm

I’m thinking China will be the worst hit. A whole lot of troubles have been papered over with a booming economy, even if it was not quite as booming as once thought. In the West, business and society can withstand recession because everyone has been through it. A bad stretch is not going to result in riots. As we saw in the Maghreb, bad times can spawn revolution. A whole lot of Chinese have grown used to easy money and easy living.

jon March 14, 2014 at 5:08 pm

I don’t think a Chinese slowdown is coming. All of the bearish reports are fabricated by the CHinese propaganda department anyway. “Look weak when you are strong”: Sun Tzu.

Joe Smith March 14, 2014 at 6:21 pm

Plus a Chinese slow down might be a drop in GROWTH from 8% to five per cent GROWTH – that still means they need five percent more raw materials (to a first approximation) than they did last year

8 March 15, 2014 at 12:37 am

Right, but the debt in the economy assumed 7% growth, so at 5% growth lots of people go bankrupt. Also, they’re already growing about 4% based on the various data.

That doesn’t mean China won’t do well in the long-run; financial innovation in China is moving incredibly fast. But a financial crisis is likely and even a full blown recession not out of the realm of possibility.

Jan March 15, 2014 at 7:23 am

Plus, 8 is luckiest Chinese number.

TallDave March 15, 2014 at 12:56 am

Well remember that’s 5% with MOE +/-10%.

Steve C. March 14, 2014 at 9:50 pm

To what end?

carlospln March 14, 2014 at 11:40 pm

..and in 1989 the consensus in the pundit sphere was that Nihon would trample all before it.

Until it didn’t http://www.thebubblebubble.com/japan-bubble/

;)

8 March 15, 2014 at 12:19 am

The U.S. could be hit in unexpected ways, such as plunging home prices in California. I wouldn’t want to be speculating in homes in Vancouver right now.

TallDave March 15, 2014 at 12:55 am

Japan already found out there are limits to fixed investment, now China using the same model will find them at less than half the PPP GDP per capita. Ironic really, like an economic policy version of the Rape of Nanjing.

Ming the Merciful March 15, 2014 at 10:39 pm

When the crash comes, will Tibet, Chinese Turkestan and Taiwan gain their rightful independence?

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