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June 09, 2011If China Catches a Cold...
Alex Frangos examines which economies will take a hit if China's growth slows:
The first set of economies affected would be big commodity producers that sell to China or rely on China’s demand indirectly. Top of that list would include Australia (coal, iron ore, natural gas), South Africa and Brazil (industrial metals) and Chile (copper). Southeast Asian countries such as Thailand and Vietnam supply rubber, and Indonesia provides a lot of coal.Those countries’ currencies, such as the Australian dollar, Brazilian real and Chilean peso, which are at record or multiyear highs, would pull back.
Another impact of a China hard landing would be oversupplies in China of steel, machinery and other basic-material items, says Mr. Anderson. During a brief economic slowdown last decade, China reduced a glut by exporting those items at very low prices, which triggered a global drop in steel prices and political standoffs with the U.S. and Europe, where steel industries have bristled in the past over Chinese steel’s flooding global markets.
China’s neighbors South Korea, Taiwan and Japan, which supply heavy machinery for construction and manufacturing, would also get hit.
Higher on the value chain would be countries that produce the high-tech goods needed for China’s burgeoning manufacturing industry, especially Germany, which relies heavily on exports to drive its economy.
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