Sandeep Jain writes: China’s slowdown has been keenly watched across the globe but much more so in the immediate neighbourhood to include ASEAN nations as also India. Chinese economy has been a driver of the global economy for the last decade specially during the period of the recent recession of 2008. Since global economies are increasingly more interlinked today than ever before, slowdown of a giant like China will definitely affect everyone else.
China is a large trading partner with India as also with ASEAN nations. The slowdown means lower consumption in China and thereby affecting commerce with these countries. However we may see the overall effects from three perspectives. First, TPP is likely to come about and even though specifics are not clear it may provide an alternative platform to the ASEAN nations. It may provide them with new markets, capital as also technology. Secondly, in case RCEP becomes a reality, even then the ASEAN and Indian economies may get an alternative. RCEP will ensure that the region of East and South Asia gets better integrated thereby offsetting the Chinese slowdown. Thirdly the Chinese efforts of BRI may also fructify-though presently in a nascent stage-again giving a boost to China. Thus there are new architectures being attempted which may have a positive counterbalancing effect. The results are however likely only in the medium to long term.
In the short term the Asian economies may benefit due to lowered commodity prices. Specially India which is a net importer of energy is already having much lower import costs helping bridge its fiscal deficit. Similar will be the case with other Asian economies.
Many Asian countries have an adverse trade relationship with China wherein China enjoys a trade surplus. Thus China’s slowdown may eventually become an opportunity for them. Similarly in case China ceases to be an attractive FDI destination other Asian nations tend to benefit directly. Thus in the overall prognosis China’s slowdown is unlikely to have an immediate adverse effect on other Asian countries. Most of them are not commodity exporters. Thus lack of China’s commodity appetite does not affect them from this perspective also. Lastly China’s slowdown may also be getting overhyped. By no means is China going into a recession. By conservative estimates also it continues to grow at 6-7% which is still substantial.
All countries must therefore carefully watch China’s economy, but as yet there is no cause for panic or concern.