China still leads world growth

Slowdown or no slowdown, China still contributes far more to global growth than other economies.

China has received a lot of negative press in the past year, given its slowing growth and market meltdown. But it is still “the single largest contributor to world GDP growth,” according to economist Stephen Roach, a senior fellow and lecturer at Yale University. Meanwhile, the world economy is “limping along at stall speed,” he says.

If China reaches its government’s official growth target of 6.7% for 2016, and if world GDP growth remains at 3.1%, as predicted by the International Monetary Fund, China will have contributed 1.2 percentage points, or nearly 39%, to that growth. No other economy comes close to that.

For example, the US is expected to see GDP growth of 2.2% in 2016 — only a quarter of China’s contribution, and enough to add only 0.3 percentage points to global growth. Europe’s economy will barely inject 0.2 percentage points, and Japan, less than 0.1. When taken together, the “advanced” economies will contribute 0.8% to world growth, two-thirds of China’s input.

Roach says this “China-centric global growth dynamic” has three implications. First, without China, world GDP growth would be only 1.9%, well below the 2.5% bar for global recessions. Second, if China experiences a “hard landing,” it will have a devastating impact. Every 1-percentage-point decline in China’s GDP growth rate would shave almost 0.2% percentage points off world GDP. Third, China is currently shifting its economy from manufacturing-led exports and investments to services and household consumption. If successful, this could bring an important source of export-led growth for China’s major trading partners — as long as other countries are given free and open access to Chinese markets. Roach’s conclusion: “The world needs a successful China more than ever.”