The problems of the Chinese economy are threatening global growth

The Chinese economy, which ranks second in the world in size, was projected to provide a third of global economic growth this year. However, contrary to expectations, it has slowed significantly over the past few months, causing concern among economists.

Particularly worrying is the decline in imports from China in many categories of goods, ranging from building materials to electronics. The demand for machines used on construction sites turned out to be lower than previously expected.

Due to the deterioration of economic activity in China, global investors withdrew more than $10 billion from Chinese stock markets, mainly from shares of large companies.

This has also affected trade in other Asian and African countries. For example, Japan reported a reduction in exports after a decrease in purchases of cars and chips from China. South Korea and Thailand also indicated a reduction in their economic forecasts due to China's weak recovery after the pandemic.

On the other hand, the slowdown in China's economy may have a positive impact on global oil prices, as well as contribute to lower prices for exported goods. This can be beneficial for countries struggling with high inflation (such as the US, UK and India).

However, the IMF analysis showed that a prolonged slowdown in China's economy is more likely to do harm than good, since many countries, especially in Asia, consider China their main export market. A reduction in Chinese exports will lead to a reduction in exports for other countries. Over the past 9 months, Asian and African countries have reduced imports by more than 14%. 

Production prices in China have also declined, which means a decrease in the value of goods exported from this country. Consumers in China spend more on services such as travel and tourism than on goods. The income level of the country's population has declined due to the pandemic and slow recovery, and in addition, problems remain in the form of a high debt burden in the real estate sector and unemployment.