China’s economy, the second largest in the world, twice the size of Japan’s, were to lapse into a meltdown situation such as this one, the effect would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen.
And here we were thinking our calls that China’s debt and excess capacity bubble would negatively impact global growth, are audacious.
But wait. Further on in the same paper, in its outlook for the Japanese economy, Daiwa says this:
Fears regarding the worsening economic situation in China are currently on the rise, but even if China’s economy worsens a bit more, assuming that the cause of said worsening is a decline in personal consumption and investment (in other words domestic demand) then the extent to which this would influence China’s imports – in other words the extent to which it would influence the world economy is thought to be minimal.
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