China’s Slowdown and Asia’s Economy

After three decades of double-digit growth, the weakening performance of China, now the world’s second-largest economy, is a major source of concern – and not just for the Chinese. But, while the slowdown will have negative consequences for some countries in the region, it is also creating opportunities for others.

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MANILA – China’s economic slowdown in 2015 will have important consequences for countries in the region and beyond. For most countries, the sub-7% GDP growth expected this year – and in the coming years – would be a cause for celebration. After three decades of double-digit growth, however, the weakening performance of what is now the world’s second-largest economy is a significant source of concern – and not just for the Chinese.

But, while China’s slowdown will have negative consequences for some countries, it is also creating opportunities for others. The fate of countries in the region depends on the structure of their economies – and, crucially, how they can adapt to their giant neighbor’s ongoing economic transformation.

Countries that produce raw materials, such as copper, oil, and minerals, for manufacturing in China are already seeing the biggest changes. China’s industrial slowdown means a corresponding reduction in world demand for these commodities. Countries such as Kazakhstan and Chile, whose economies are heavily concentrated in such sectors, are finding the contraction a serious challenge.

Countries that produce intermediate goods are also feeling the pinch. Japan, for example, manufactures parts and components that are exported to China for the production of consumer electronics. In other words, its value-added exports to the world often pass through China. As a result, China’s slowdown has had a noticeable effect on Japan’s export performance.