A sharp slowdown in the world’s second largest economy China would hit global growth hard, according to a report by Fitch ratings agency, which warned of “significant knock-on effects” for the rest of the world.
In its report published Tuesday, Fitch warned that a sharp slowdown in China’s GDP growth rate to 2.3 percent during 2016-2018 “would disrupt global trade and hinder growth, with significant knock-on effects for emerging markets and global corporates. In turn, this would keep short-term interest rates and commodity prices lower for longer.”
Global GDP growth is currently expected to be 3.1 percent in 2017, according to Oxford Economics’ global economic model which was used by Fitch to frame its “shock” China scenario. But if a slowdown of such a magnitude materialized in China, Fitch said global GDP growth would slow to 1.8 percent in 2017.
As a result, any rise in U.S. and euro zone short-term interest rates would be postponed, and oil prices would remain under pressure, Fitch said.