"The likelihood of a Chinese growth slowdown during 2012 presents, along with Europe's austerity-induced recession, a headwind that may more than offset the global boost caused by the modest pickup in US economic growth." John Makin, AEI
In his April Economic Outlook, American Enterprise Institute (AEI) economist John Makin assesses the risks the world faces as a result of China’s slowing economy. With the coming transition in Chinese leadership, it is unlikely that the world's second largest economy will alter its policies to stimulate growth. As a result, the whole world may feel China's pain.
Makin's key points:
- Slumping Chinese manufacturing, housing, and exports suggest slower GDP growth in 2012, and shifts in policy that would reverse this trend are unlikely to occur during China's leadership transition.
- In the midst of European economic austerity and looming US tax hikes, China's slowdown could not come at a worse time.
- By stimulating its economy, China could promote a worldwide economic recovery this year--but whether the country will contribute to global growth or act in self-interest via currency manipulation remains to be seen.
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