What are the potential repercussions of China’s economic situation on the U.S. and global economies?”
“It depends where you sit relative to the Chinese economy. There are countries and companies that have been riding this investment boom that has been driving Chinese growth, but I would argue that is not sustainable and is now collapsing under its own weight. And for those countries–like Australia selling iron ore, Chile selling copper, Brazil selling iron ore, Germany selling machinery–they’re very exposed to this economic adjustment that’s taking place, this correction.
But if your goal over the long term is to sell to the Chinese consumer, and if you have an economy positioned to do that–if you’re a producer of finished goods or a producer of food–then this economic adjustment could be a good thing if it unlocks the buying power of the Chinese consumer. For any economy around the world that wants to sell more to China, that wants to have a more balanced trade relationship with China, a meaningful economic adjustment that resulted in a more balanced domestic economy in China would be a very positive thing.”
Patrick Chovanec is a professor at Tsinghua University’s School of Economics and Management in Beijing, China. He’s being interviewed here by the Council on Foreign Relations.