On Tuesday, Jan. 21, the IMF's Deputy Managing Director, Min Zhu (a former Deputy Governor of the People's Bank of China) published a report, which discussed the consequences from the Chinese government's efforts to refocus away from an investment-based economy:
“Our analysis suggests that a one percentage point cut in China's investment growth would subtract between one-half and nine-tenths of a percentage point from GDP growth in the regional supply chain. This would create a significant impact across a range of economic, trade, and financial variables among China's major trading partners and commodity exporters.
Financial markets will likely be volatile for the foreseeable future. The main reason is that an orderly transition to a world without unconventional central bank policies will likely face multiple challenges.”
“Our analysis suggests that a one percentage point cut in China's investment growth would subtract between one-half and nine-tenths of a percentage point from GDP growth in the regional supply chain. This would create a significant impact across a range of economic, trade, and financial variables among China's major trading partners and commodity exporters.
Financial markets will likely be volatile for the foreseeable future. The main reason is that an orderly transition to a world without unconventional central bank policies will likely face multiple challenges.”