Project Syndicate: Impact of Chinese Recession

Economic recession, spurred by protectionist policies, is inevitable for China. Kenneth Rogoff, writing for Project Syndicate, rejects economic analysis suggesting that much of China’s problems could be regionally contained and argues that the China’s problems would quickly spread to international capital markets with so many foreign firms earning profits in Chinese markets. Asia’s high saving rates contribute to low interest rates for both the US and EU: “Thus, instead of leading to lower global real interest rates, a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere – especially if a second Asian financial crisis leads to a sharp draw-down of central bank reserves,” Rogoff writes. “As bad as a slowdown in exports to China would be for many countries, a significant rise in global interest rates would be much worse.” Countries rebounded from global recession thanks to low rates. Chinese authorities helped the global economy by adeptly handling economic crises since 2008. The US and China could forestall recessionary pressures by reaching a trade agreement before January 1. Otherwise, the world might discover just how much the world’s second largest economy matters. – YaleGlobal

Project Syndicate: Impact of Chinese Recession

Too big to fail: Economic forecasts suggesting that recession in China would hurt the globe, yet confine most pain regionally, engage in wishful thinking
Kenneth Rogoff
Friday, November 9, 2018

Read the article from Project Syndicate  about the global impact from a Chinese recession, including rising interest rates.

Kenneth Rogoff, professor of economics and public policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of This Time is Different: Eight Centuries of Financial Folly, his new book, The Curse of Cash, was released in August 2016.

© Project Syndicate - 2018

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