Chinese economy may shock the world in its deceleration – says the IMF

The IMF in its Asia Economic Outlook predicts that Chinese economy’s more than expected deceleration is an economic risk for developing Asia including India.

At the Asia’s Economic Outlook Conference speech made by Mitsuhiro Furusawa, Deputy Managing Director of the IMF says that Renminbi regime shift will have ripple effects.

China’s downward correction of its currency may produce competition to exports from rest of Asia.

Trade volumes are coming down across Asia. India last month has reported consecutive decline in its export for the eleventh month. According to the Commerce Ministry, exports from the country may fall below $300 bn mark for the first time since 2010.

Low exports and slower consumption of commodities by Chinese economy will reduce income in commodity exporting countries. This may reduce overall exports globally.

In the context of the falling Chinese growth, commodity price fall and the feedback effect of reduced exports, global economy will register slower growth amidst the continuing recession.

“A sharper-than-expected slowdown in China—or a more rapid shift in the composition of Chinese demand—is one of the key risks facing Asia. The spillovers from this transition could affect each of your countries, your markets, and your business communities.”

The Fund estimates that a one percentage point slowdown in Chinese growth is associated with a 0.3 percentage point decline for other Asian countries.

Mr Furusawa observed. According to the IMF, another risk could be the tightening global financial conditions emanating from the US Fed’s interest rate policy.