• Email Us: [email protected]
  • Contact Us: +1 718 874 1545
  • Skip to main content
  • Skip to primary sidebar

Medical Market Report

  • Home
  • All Reports
  • About Us
  • Contact Us

Column: China’s Evergrande problem today may dent global growth tomorrow

September 23, 2021 by David Barret Leave a Comment

September 23, 2021

By Jamie McGeever

ORLANDO, Fla. (Reuters) – For now, it’s business as usual. But how China’s Evergrande problem unfolds in the coming weeks could end up influencing global policymakers’ decision-making next year.

Top Federal Reserve and Bank of England officials this week played down contagion risks, as their central banks indicated an earlier start to monetary tightening than markets were expecting, while Brazil jacked up interest rates another 100 basis points in its battle against inflation.

Yet if the Evergrande crisis and spillover across the Chinese property sector deepens a domestic economic slowdown already underway, China’s record share of global growth will surely make them – and others – pause for thought.

To be clear, any such pause from the Fed or other central banks in response to a potential drag on growth, or a tightening of financial conditions, is an unlikely scenario right now.

But the very small tail risk could get fatter, especially with the delta variant spreading, economic data weakening, and credit growth turning negative globally.

Even though China’s economy has been gradually slowing for years, well before the current tremors, it has still expanded much faster than elsewhere. Global growth is hugely reliant on China.

According to George Saravelos at Deutsche Bank, China was responsible for more than a third of world GDP growth pre-pandemic, a “massive global growth turbocharge” which was double its share of around 17% a decade earlier.

When China’s property market last slumped in 2015, the country’s share of global GDP growth was 29%, according to Deutsche.

The World Bank estimates that China will account for around a quarter of global growth this year, the same as the United States.

Economists at Citi note that China has accounted for around half of all global investment growth over the last decade, exerting a “disproportionate” influence on developed economies like Germany and commodity-dependent economies like Brazil.

They have a fairly benign outlook for the world economy, but warn: “In the near term, China is capable of generating a significant amount of ‘real’, or economic, contagion globally.”

GLOBAL SQUEEZE

Evergrande, the world’s largest property developer, is buckling under the weight of a $300 billion debt load, almost all owed to domestic lenders. Its bonds are trading around 30 cents in the dollar and its shares have slumped 75% in recent months.

The government has so far not stepped in to support, rescue or restructure the company or the wider sector, although that may yet happen. The central bank has injected local money markets with hundreds of billions of yuan of liquidity.

The consensus view is that Beijing will ultimately do what is needed to avoid a disorderly default or wider implosion across a sector which accounts for up to 20% of GDP. But economists are now sketching out what the economic impact of that might look like.

In a worse-case scenario, economists at Barclays reckon a 10% contraction in property investment could knock around two percentage points off Chinese GDP growth, and UBS economists say a sharp property downturn could push year-on-year growth in the fourth quarter below 3%.

Economists at Goldman Sachs go further, warning that a deeper property sector downturn and tighter financial conditions could land a 4.1 percentage point blow to GDP next year, “although this remains more of a left tail risk at this point.”

Any of those scenarios would risk dragging growth below Beijing’s 2022 annual growth target of around 5.5%, and put a squeeze on anticipated global growth of just under 5%.

But these are not base-case outlooks, and policymakers around the world are pressing ahead with their domestic agendas.

Speaking after the Fed took a step closer to unwinding its crisis-levels bond purchases and brought forward prospects for its first rate hike to next year, Chair Jerome Powell said Evergrande’s problems are “very particular” to China.

And Bank of England Deputy Governor Sam Woods said on Thursday he is cautiously optimistic the Evergrande situation won’t go “badly wrong”, but it could well be something to worry about in the future.

(By Jamie McGeever, Editing by Nick Zieminski)

Source Link Column: China’s Evergrande problem today may dent global growth tomorrow

David Barret
David Barret

Related posts:

  1. Tennis-Sabalenka defeats Mertens in straight sets in U.S. Open fourth round
  2. China’s export, import growth likely eased in Aug on COVID-19 cases, supply bottlenecks: Reuters poll
  3. Apple and Google bow to pressure in Russia to remove Kremlin critic’s tactical voting app
  4. Iran joins expanding Asian security body led by Moscow, Beijing

Filed Under: News

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • Have You Seen This Snake? Florida Wants Your Help Finding Rare Species Seen Once In 50 Years
  • Plague Confirmed In Lake Tahoe Area For First Time In 5 Years, California Officials Say
  • Supergiant Star Spotted Blowing Milky Way’s Largest Bubble Of Its Kind, Surprising Astronomers
  • Game Theory Promised To Explain Human Decisions. Did It?
  • Genes, Hormones, And Hairstyling – Here Are Some Causes Of Hair Loss You Might Not Have Heard Of
  • Answer To 30-Year-Old Mystery Code Embedded In The Kryptos CIA Sculpture To Be Sold At Auction
  • Merry Mice: Human Brain Cells Transplanted Into Mice Reduce Anxiety And Depression
  • Asteroid-Bound NASA Mission Snaps Earth-Moon Portrait From 290 Million Kilometers Away
  • Forget State Mammals – Some States Have Official Dinosaurs, And They’re Awesome
  • Female Jumping Spiders Of Two Species Prefer The Sexy Red Males Of One, Leading To Hybridization
  • Why Is It So Difficult To Find New Moons In The Solar System?
  • New “Oxygen-Breathing” Crystal Could Recharge Fuel Cells And More
  • Some Gut Bacteria Cause Insomnia While Others Protect Against It, 400,000-Person Study Argues
  • Neanderthals And Homo Sapiens Got It On 100,000 Years Earlier Than We Thought
  • “Womb Of The Universe”: Native American Tribal Elders Help Archaeologists Decipher Ancient Rock Art In Missouri Cave
  • 16,000-Year-Old Paintings Suggest Prehistoric Humans Risked Their Lives To Enter “Shaman Training Cave”
  • Final Gasps Of A Dying Star Seen Through A Record-Breaking 130 Years Of Data
  • COVID-19 “Vaccine Alternative” Injection Could Be On Fast-Track To Approval From FDA
  • New Jersey Officials Investigate Possible First Locally Acquired Malaria Case Since 1991
  • First-of-Its-Kind Bright Orange Nurse Shark Recorded Off Costa Rica Makes History
  • Business
  • Health
  • News
  • Science
  • Technology
  • +1 718 874 1545
  • +91 78878 22626
  • [email protected]
Office Address
Prudour Pvt. Ltd. 420 Lexington Avenue Suite 300 New York City, NY 10170.

Powered by Prudour Network

Copyrights © 2025 · Medical Market Report. All Rights Reserved.

Go to mobile version