Thursday, November 12, 2015

China Could Parallel Japan, not Cause Global Recession When Economy Slows

When Japan’s economy downshifted dramatically in the 1990s, the rest of the world managed to do just fine. Now, as China suffers a sustained slowdown, there’s a group of economists who say the same may well happen again.

Sure, global growth already has been clipped by the deterioration in China’s expansion. It is, after all, the world’s second-largest economy, just as Japan was back then.

Yet there are reasons to suspect that all the hand-wringing about China pulling down the rest of the world may be a tad overdone. Just as the country’s slump is producing obvious losers -- commodity exporters being a prime example -- it’s producing winners as well. Airlines, automakers and U.S. consumers are among those making out from the steep decline in prices for energy and other raw materials the China slump has wrought.

And it’s these less-publicized beneficiaries that will help the world withstand a protracted period of sub-par performance by China -- provided, of course, it avoids a hard landing and continues to shift the focus of its economy toward consumers and services and away from investment and exports.

Hat tip to Randy.

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