Bleak Outlook
According to Bloomberg, a large number of investment banks, such as Nomura Securities and Morgan Stanley, are estimating China’s economic growth rate for this year at between 5% and 6%. At present, the Chinese government’s annual economic growth target is 6.5% to 7.0%.
China’s economic growth rate for the first quarter of this year, which is scheduled to be announced on April 15, is predicted to be lower than that for the last quarter of 2015. Nomura Securities has estimated its Q1 growth rate at 6%, 0.8 percentage points lower than the figure for Q4, 2015. Societe Generale’s estimates for the first and second quarters are 6.2% and less than 6%, respectively. Barclays predicted that the percentage would fall from 6.3% to 6% between Q1 and Q4 while Citi said it would drop from 6.7% to 6% during the same period. The investment banks’ average estimate for Q1 this year is 6.7%, the lowest since Q1, 2009.
The slowdown of the Chinese economy is likely to affect a number of economies around the world. According to the IMF, a one percentage point decline in China’s annual economic growth rate results in a 0.8 percentage point decrease in the GDP of major Asian economies. The Bank of Korea recently said that the global economic growth rate and that of emerging economies fall each by 0.89 percentage points and 1.03 percentage points every time China’s GDP shows a decrease of 2.5%.
Under the circumstances, South Korea is predicted to take a serious hit due to its significant dependence on the Chinese economy. Exports to China account for 25.4% of South Korea’s total exports and the South Korean economy’s exposure to the Chinese economy is at 12.8%. Moody’s recently pointed out that South Korea is the most vulnerable to the slowdown of the emerging economies including China. Morgan Stanley also said South Korea’s economic growth would fall to 1%, a seven-year low, if China’s dropped to 5.8%.
According to the Hyundai Research Institute, a one percentage point decrease in China’ economic growth rate is likely to lead to a 0.7% fall in Singapore’s, 0.6% fall in Indonesia’s, 0.5% fall in South Korea’s, 0.2% fall in Japans’ and 0.1% fall in the United States’. South Korea’s growth rate was 2.6% last year, and it could drop to 2.1% if China’s fell to 5.8%.