Global Impact of China's Growth Slowdown and Structural Change

China’s sustained rapid growth prior to the global financial crisis greatly benefited the global economy. Both developed and developing countries gained from China’s healthy appetite for a wide range of goods and services. For example, Germany and Japan exported lots of machines and capital goods, while Latin American countries exported lots of commodities and materials. However, since the global crisis, China’s growth has slowed down visibly, along with the rest of the world. The slowdown has given rise to concerns and fears that just as China’s robust growth lifted the global economy, its recent deceleration will drag down global growth. ADB research performed for the Asian Development Outlook 2016 attempts to quantify the effect of China’s slowdown on the growth of different regions of the world. As expected, the impact will be most pronounced for East Asian economies, which are China’s closest trading and economic partners. Furthermore, the magnitude of the impact will depend on the magnitude of China’s slowdown. ADB research also delves into a related issue that receives less attention than the effect of China’s slowdown, namely the effect of China’s structural change. The evidence suggests that economies that can best adapt to China’s structural change can mitigate the negative effect of China’s slower growth.