China’s slowdown is the biggest threat facing global economy, former chief economist at the International Monetary Fund (IMF) told BBC.
Current Professor of Economics at Harvard University and former IMF economist Ken Rogoff said the economy could be “slowing down much more than the official figures show.”
“Everyone says China’s different, the state owns everything they can control it,” Rogoff said. “Only to a point. It’s definitely a worry, a hard landing in China.
“If you want to look at a part of the world that has a debt problem, look at China. They’ve seen credit fuelled growth and these things don’t go on forever.”
A Reuters poll shows that China’s economic growth next year is expected to slow down to 6.5 per cent, compared to this year’s 6.6 per cent.
The decline in global demand has resulted in the country’s exports falling 10 per cent year-on-year in September. Analysts also expect the increasing national debt levels to trigger a new financial crisis.
Furthermore, private investment has continued to drop. “The slowdown in private sector investment over the past years means that the organic growth momentum of the economy may have declined, requiring policymakers to be more vigilant in terms of keeping policies as supportive as possible,” said economists at HSBC in a statement.
The Chinese government has allocated more spending to provide fiscal stimulus, cutting lending rates six times since November 2014 and lowering banks’ cash reserve requirements to 17 per cent. However, analysts believe the government’s effort to increase liquidity in the market will not help much, as investors are more likely to save than make new investments.