Why Kenneth Rogoff Thinks China Is Worst Threat to World Economy
Kenneth Rogoff on China
On Monday, September 26, 2016, Kenneth Rogoff, professor of economics at Harvard University and former chief economist of the International Monetary Fund, told the BBC that the slowdown in China’s economy (FXI) (YINN) is the biggest threat to the world economy (ACWI) (VTI).
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He said, “I think the economy is slowing down much more than the official figures show.” This slowdown in economic activity is a big risk to the world economy. The economy is currently growing at a rate of 6.7%. In the first and second quarters of 2016, the economy also grew at a rate of 6.7%. However, since 2Q10, the country’s economic growth has been falling gradually.
How China’s slowdown affected commodity movement
From 2011 to 2013, a massive industrialization and urbanization transformation took place in China (MCHI) (FXI). After many years of investments, projects haven’t been able to deliver the expected return to investors. This raised questions about additional investment plans. As a result, the demand for commodities (DBC) in domestic consumption fell and dragged down commodities.
China (YINN) (ASHR) is one of the major commodity-consuming countries. It consumes nearly 50% of the world’s commodities. Domestic consumption and exports are two important components of China’s (FXI) economy. The fall in its domestic consumption and exports created worries across the globe (ACWI), as China is an important trading partner for many countries.
Kenneth Rogoff sees the gradual slowdown in China’s economy as the greatest threat to the world economy right now. If we see further slowdown in coming quarters, then it will become a serious problem for the global economy.
In the next part of this series, we’ll analyze how China’s debt-fueled economy is creating worries for the global market.