Towards recoupling? Assessing the global impact of a Chinese hard landing through trade and commodity price channels

摘要

China's rapid growth over the past decade has been one of the main drivers of the rise in mineral commodity demand and prices. While concerns about the sustainability of China's growth model are rising, we assess to what extent rebalancing through a hard landing in China would impact other countries. After reviewing the main arguments pointing to a hard landing scenario-historical rebalancing precedents, overinvestment, unsustainable debt trends and real estate bubble-we use a global VAR methodology adapted to conditional forecasting to simulate the impact of a Chinese hard landing. We model metal and oil markets separately to account for their different end-use patterns and consumption intensity in China. According to our estimates, emerging economies would be hardest hit-with a 7.5% cumulated growth loss after 5 years-in particular in Emerging Asia and in commodity-exporting regions such as Latin America. The "growth gap" between emerging and advanced economies would be considerably reduced, leading to partial recoupling. In the light of these results, both the "commodity supercycle" and sustained convergence observed in emerging economies over the past decade could be to a large extent attributed to the high and unbalanced growth pattern in China.