China’s GDP grew by 4.9 percent in the third quarter compared to the same period last year, marking the slowest growth in a year and one of the weakest results in over a decade.
The crisis in the real estate sector and power shortages have slowed the economic growth of the world’s second-largest economy. Additionally, Beijing has signaled that it is in no rush to stimulate the economy, suggesting that growth could further slow in the coming months.
What does this mean for the Chinese and global economy? – Given the difficulties in the real estate sector and the side effects in the energy sector due to regulatory interventions, it is no surprise that growth has slowed in China. Just like in Japan in the 1980s (or in Croatia from 2009-2014) when the economy was characterized by excessive debt, a slowdown in growth must come sooner or later. I do not expect a financial crisis in China but rather a period of slower growth until the debt level is reduced to a reasonable level – says macroeconomist Goran Šaravanja, owner of the consulting firm Imelum.
The continued slowdown in industrial production would reduce the global price of industrial goods, which, according to Šaravanja, would be beneficial for all importing countries of such goods (including Croatia). – The main risk for the EU and Croatia is how slower growth in China will affect German exports. The ideal situation for the global economy (in the medium term) would be for the share of personal consumption in GDP to increase during the adjustment that follows in China. This would lead to an increase in Chinese imports, a reduction in the current account surplus, and the impact on the global economy could even be slightly positive. Whether the Chinese adjustment will reflect this way on the global economy in the medium term will depend on the decisions of the Chinese authorities, i.e. how they decide to distribute the burden of adjustment within the Chinese system – emphasizes Šaravanja.
