Will China’s Economic slowdown make us all poorer?

[karutamral]

Big implications

 

Shares tumbled the world over - roughly 5% on average in Europe, less at this instant in North America.

Investors are in effect shouting that the era of so-called Chinese exceptionalism - that China can grow faster for longer than any other economy in history - is over, having become so dependent in recent years on debt-fuelled investment (which was what my film, How China Fooled the World, warned about at the start of 2014).

 

And they are not just delivering that verdict in falling shares, but in oil prices that have tumbled to the slum levels of 2009 and commodities in general are back at levels not seen since 1999.

 

All of this has big implications for most of us in the coming weeks and years.

Now we may be tempted to celebrate the increase in our spending power, thanks to the tumbling prices of food and energy that China's waning appetite has caused.

 

Turning Japanese?

 

And those with big debts may be chipper that both the US Federal Reserve and Bank of England may delay interest rate rises by yet another few months, because of concerns that China is exporting lower growth and deflation to us.

But we should be under no illusion that if China is turning Japanese - if it is on the verge of years of very low growth or even stagnation - we will all pay a big price.

 

That is especially true in the UK, where the big flaw in our recovery is that we are too dependent on spending by domestic consumers and domestic businesses - such that we are borrowing money from the rest of the world to finance our living standards in record amounts - or to use the jargon, we have a record current-account deficit or negative balance on our income from trade and investment with the rest of the world.

 

If a Chinese deceleration leads to a permanent slowdown in global growth, our ability to close that deficit through sales to the rest of the world would be impaired - which would force us to spend much less at home. Or to put it another way, we would become considerably poorer.

 

http://www.bbc.com/news/business-34046942

[Keijiro]

if you're already poor, then yes

[ErikaEGO]

if you're already poor, then yes

 

[boo!]

The only people it makes poorer are the rich. For everyone else its good since prices are dropping for everything.

[King of Spades]

Not necessarily. 

 

The price of commodities (aka goods that we buy on daily basis) will be dropping. 

 

E.g, soon we shall see the fall of gas prices. Yay!

[SUPERultramegaTIGHTPUSSY]

Burn baby burn don't think it matters to me at this point.

[fishywishy]

The only people it makes poorer are the rich. For everyone else its good since prices are dropping for everything.