Could the coronavirus epidemic trigger a China-led global recession?
It was back in 2007 that China’s then premier Wen Jiabao voiced alarm that the country’s growth was “unstable, unbalanced, uncoordinated and unsustainable”.
Since then, China’s growth has defiantly continued to surge, to the admiration of some, and the alarm of others. But there are signs we are veering into a perfect storm fuelled by the tariff war between the United States and China, technological conflict, US national security paranoias, unsustainable credit and debt growth inside the mainland, continuing struggles to resolve the harm inflicted by the 2008 global financial crisis, and, of course, the still-evolving coronavirus shock emanating from Wuhan.
And before anyone crow too enthusiastically over China’s gathering storm, evidence seems strong that China’s shock may be shared by us all. Rana Foroohar wondered in the Financial Times earlier this week whether the coronavirus outbreak was “exactly the sort of nexpected trigger event that many market participants have been fretting about”, adding: “We might be about to see something new: a global slowdown led by China, rather than the US.”
As the tens of thousands of Chinese factories at the heart of global supply chains ranging from cars to smartphones remain closed, and as hospitals wrestle to control the virus, so international giants such as Apple, Walmart, Starbucks, Hyundai, Toyota and dozens of others are warning of significant collateral damage in markets across the world.