China’s slowdown is raising questions for global growth

China’s slowdown is raising questions for global growth

AFP / Washington

The Chinese economy, weighed down by electricity shortages and a vast real estate crisis, has lost its lustre recently, to the point where economists are starting to question its impact on the global growth it has helped drive for more than 20 years.

The difficulties of the real estate sector in China triggered by the troubles of giant Evergrande could pose risks for the world economy and affect the United States, the Federal Reserve warned in its report on financial stability released Monday.

That is a marked change of tone from September, when Fed chairman Jerome Powell still believed the world’s largest economy was not really directly exposed to difficulties in China.

Evergrande, estimated to be worth some €260bn, is one of the biggest companies in China.

Its financial situation is closely scrutinised because its collapse would deal a serious blow to the growth of the Asian giant.

The real estate sector is estimated to account for 25%-30% of China’s GDP.

In the third quarter, gross domestic product, suffering drag from the Evergrande crisis, grew by 4.9% year-on-year, down from 7.9% in the second quarter.

“So far, the likes of the Evergrande debacle has been contained by Chinese official sector buffering,” said