China Slowdown

The Chinese authorities are fighting hard on every front to try and counter the effects of an economic slowdown which is thought by many to be deeper than official statistics reveal. Nevertheless what is now happening has wide implications for the rest of the world, most of which will suffer aftershocks.

It is a serious business when the fastest growing economy in the world slows up, even if it carries on growing at enviable levels. This is because the whole balance of globalisation has to a large extent focussed on the ever growing size of China’s contribution, to the point where it has been factored in and taken for granted. Markets are now in full retreat everywhere and oil has dropped to record lows for recent times. The FTSE 100 has fallen a thousand points from its peak. The situation is complicated by the large element of borrowing which has fuelled global stock prices, which if recovery is not rapid and sustained, will lead to knock on losses throughout the global system.

Given the situation now unfolding, the declaration by the CBI that the UK economy is likely to grow faster than expected, might be a touch hasty. We shall have to see. Cheaper oil is good, but a slowdown in China, mayhem in emerging markets and muddle in the eurozone are headwinds to say the very least. One perverse advantage of being unable to grow our exports may be that we have relatively less to lose.