There was very little that was encouraging in China’s economic performance in July. There are three reasons why the immediate outlook is gloomy.
There is little doubt that the Chinese economy is in poor shape. It is also becoming evident that the problems go deeper than one-off shocks or the sort of occasional cyclical downturns that all other economies suffer from time to time. With limited prospects for a return to strong growth any time soon, the common assumption is that China is likely to drag the rest of Asia down with it. There are many good reasons why a torpid Chinese economy could hurt its neighbours, as we discuss below. But this is probably only one part of the picture. It is also the case that China’s slowdown could bring with it some benefits for the rest of us. Overall, our view is that the Asean region will weather a Chinese downturn reasonably well.
Where is the Chinese economy heading?
