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---

### Introduction
- China accounted for one-third of global growth during 2000–14.
- Exports to China increased from 3 percent to 9 percent of world exports, and from 9 percent to 22 percent of Asian exports in the last 15 years.
- The 2009 policy stimulus package raised investment, boosting GDP growth and contributing to the increase in imports when global demand was collapsing.
- China’s transition is driven by:
  - a structural slowdown on the convergence path to high-income status;
  - moving up the value-added chain and on-shoring (moving production of previously imported goods to China);
  - demand rebalancing from stimulus-boosted investment towards consumption.
- Substantial uncertainty remains, amplified by the potential fallout from the stimulus-related credit boom and the risk of a deep cyclical slowdown.

### Empirical evidence on spillovers (literature summary)
- Cashin et al (2016): a permanent 1 percent reduction in China’s GDP growth translates into a reduction of 0.23 percentage points in global growth in the short-run.
- Dizioli et al (2016): for a 1 percent reduction in China’s growth, ASEAN5 GDP falls by 0.3 percent on average.
- Duval and others (2014): for a 1 percent fall in China’s GDP, a median Asian economy’s GDP falls by 0.3 percent and a median non-Asian economy’s GDP falls by 0.15 percent.
- Blagrave and Vesperoni (2016): a 1 percentage point decline to China’s final demand growth would reduce export growth by about 0.1–0.2 percentage points for the average country; impact largest in Emerging Asia.
- Ahuja and Malhar (2012): estimated spillovers from a reduction in fixed investment in China show impacts on some Asian economies proportional to their exports to China.
- Hong and others (2016): a simultaneous fall in investment with an increase in consumption (rebalancing) leads to a small reduction in the GDP of other Asian economies.

### Modeling approach
- Model used: IMF’s Flexible System of Global Models (FSGM, Andrle and others, 2015).
- Simulated developments independently:
  - the structural slowdown,
  - on-shoring,
  - demand rebalancing,
  - a cyclical slowdown.
- Simulations use plausible assumptions about magnitudes but are illustrative given uncertainty.
- FSGM focuses on trade spillovers and abstracts from financial spillovers.

### Main projected spillover conclusions
- Overall magnitude:
  - Projected spillovers are not large overall; plausible structural developments in China will dampen positive spillovers to trading partners but the dampening is generally mild.
- Geographic concentration:
  - China’s closest trading partners are likely to suffer the most (stronger trade ties imply stronger spillovers).
- Demand rebalancing impacts (examples and magnitudes preserved as in source):
  - Korea: growth falls by roughly half of the decline in China’s growth in the first year.
  - Japan: growth falls by a quarter of the decline in China’s growth in the first year.
  - Indonesia: growth falls by a quarter of the decline in China’s growth in the first year.
  - Hong Kong SAR: growth is trimmed by about 80 percent of China’s growth showdown in the first year.
- Commodity-exporter impacts:
  - Mongolia: growth lower by over twice the drop in China’s growth (especially under demand rebalancing).
  - Australia: growth falls by a quarter of the fall in China’s growth (both trade and commodity channels).
- Cyclical slowdown (financial stress) impacts:
  - Short-run effects are largest under a cyclical shock.
  - Malaysia and Thailand: in the first year of the shock, impacts are about half of the decline in China’s growth.
  - Singapore and the Philippines: growth falls by about a third of the fall in China’s growth in the first year.
  - Mongolia: growth falls by 1.5 times the decline in China’s growth under a cyclical shock.

### Heterogeneity of effects and channels
- Different trends produce different cross-country profiles of spillovers:
  - Structural slowdown: mild dampening of world growth.
  - On-shoring and moving up the value-added chain: can crowd out producers from advanced economies while creating opportunities for lower-value-added producers in poorer developing countries.
  - Demand rebalancing (investment → consumption): harms commodity exporters that benefited from China’s investment boom but can benefit exporters of consumer goods; lower commodity prices may offset some negative effects for others.
- Country-level impact depends on exposures:
  - Dependence on China’s final demand, commodity exposure, and position in global value chains drive differential outcomes.

### Scenarios and modelled experiments (design and key parameter values)
- Structural slowdown (productivity-driven):
  - Growth slowing by 1.5 percentage points over a 5-year period.
  - Cuts the level of China’s GDP after 5 years by roughly 5 percent compared to no-slowdown.
- Tradable-sector vs economy-wide structural slowing:
  - Both lower China’s GDP by roughly 5 percent after five years; tradable-only slowing produces a depreciation of the exchange rate vs appreciation under economy-wide slowing.
- On-shoring:
  - Assumed reduction in the import content of China’s exports of roughly 5 percentage points over 5 years (operationalized as a 1 percentage point fall per year for 5 years).
- Demand rebalancing:
  - Modeled as transfers to LIQ households financed by cuts in public investment.
  - Assumes a decline in the share of public investment in GDP of roughly 7.5 percentage points over five years (operationalized as public investment declining by 1.5 percent of GDP each year for five years and remaining 7.5 percent of GDP permanently lower thereafter).
  - Lam and Wingender (2015) estimate additional social expenditures of 7–8 percent of GDP in the medium term.
  - Two variants on public capital productivity:
    - (i) foregone public investment totally inefficient (no contribution to private productivity);
    - (ii) foregone public investment mildly efficient (¼ of the model’s standard impact on private productivity).
- Cyclical slowdown (financial stress):
  - Asset prices (equities and real estate) fall by 10 percent in the first year, returning to baseline in the second year.
  - Corporate risk premium increases by 150 basis points in the first year, returning to baseline in the second year.

### Flexible System of Global Models (FSGM) — modelling features
- Semi-structural, annual, multi-region, general equilibrium model with stock-flow consistency and Blanchard-Weil-Yaari OLG households (includes LIQ households).
- Key blocks:
  - micro-founded consumption (OLG + LIQ),
  - Tobin's Q private investment,
  - government absorption and public capital,
  - reduced-form exports/imports,
  - Cobb-Douglas potential output with trend TFP,
  - Phillips-curve-based CPIX inflation,
  - three commodity prices (oil, food, metals).
- Monetary policy: interest-rate reaction function (flexible to fixed exchange rate, monetary union, or managed float); long-term 10-year rate based on expectations theory plus a term premium.
- Fiscal authority targets a long-run debt-to-GDP ratio; standard fiscal reaction function adjusts general transfers to maintain debt target.

### Simulation results — China domestic impacts (selected highlights)
- Structural slowdown (economy-wide, 5-year, ~5 percent GDP loss):
  - Lower return to capital → lower private capital stock and investment.
  - Lower real wages → lower consumption; imports compress.
  - Exchange rate appreciates; current account improves.
  - Core CPI inflation falls slightly.
- Tradable-sector structural slowing (same GDP loss concentrated in tradables):
  - Exchange rate depreciates (relative price of Chinese tradables rises).
  - Larger reductions in real imports and exports versus economy-wide case.
- On-shoring (import content of exports falls 1 percentage point per year for 5 years):
  - Permanent rise in China’s output level via higher investment and capital stock.
  - Exchange rate appreciates; imported investment goods cheaper → further investment.
  - Core inflation initially rises despite appreciation; real imports fall, real investment rises strongly.
- Demand rebalancing (public investment down 1.5 percent of GDP/year for 5 years → transfers up):
  - If foregone public investment is totally inefficient: GDP falls slightly short run, then is 0.1 percent above baseline by 2020.
  - If foregone public investment is mildly efficient (¼ productivity effect): GDP is permanently lower; level of GDP in China is lower than baseline by 0.5 percent in 2020.
  - Shifts demand from investment to consumption → private consumption and private investment rise initially; exchange rate appreciates; imports fall.
- Cyclical slowdown (financial stress: -10 percent asset prices, +150 bps corporate premium in year 1):
  - Largest negative impact on China: private real investment falls dramatically (peak falls around double-digit percentages), consumption falls, imports compress sharply.
  - Current account improves initially; core inflation falls markedly.
  - Exchange rate eventually appreciates as NFA targets are restored.

### Simulation results — global spillovers (selected magnitudes)
- Economy-wide structural slowdown:
  - Global Real GDP reduced by roughly 1 percent after five years.
  - World excluding China Real GDP impact ≈ 10 percent of the decline in China.
  - Global real oil and metals prices lower by roughly 7 percent after five years.
- Tradable-sector structural slowing:
  - Global spillovers virtually identical in magnitude to economy-wide case; allocation across regions differs by trade exposure and terms-of-trade effects.
- On-shoring:
  - World Real GDP excluding China falls by a trivial amount; global GDP net effect slightly positive due to China’s output rise.
  - Global real price of oil and metals increase slightly over time.
  - Oil exporters’ GDP increases by about 15 percent of the increase in China’s GDP after 5 years.
- Demand rebalancing:
  - World excluding China GDP declines most when public investment does not contribute to private productivity.
  - Commodity price declines (when China’s GDP falls) buffer some spillovers for commodity-importing countries.
- Cyclical slowdown:
  - World excluding China GDP falls by 10 percent of the decline in China in the first year and is above baseline after five years.
  - Global real oil and metal prices fall by 3 percent in the first year; about 1 percent below baseline after 5 years.
  - Oil exporters suffer the largest and longest-lasting negative impacts.

### Country-level highlights (selected entries; GDP-level impacts normalized to a 1 percent change in China’s GDP level after 5 years; cyclical slowing shown for first-year impact)
- Mongolia:
  - Structural slowdown: -0.60
  - Demand rebalancing: -1.01
  - On-shoring: -0.47
  - Cyclical slowdown (first year): -1.0
  - Note: over 80 percent of Mongolia’s exports go to China; commodities dominate exports.
- Hong Kong SAR:
  - Structural slowdown: -0.69
  - Demand rebalancing: -0.42
  - On-shoring: -0.68
  - Cyclical slowdown: -0.3
- Japan:
  - Structural slowdown: -0.13
  - Demand rebalancing: -0.35
  - On-shoring: -0.91
  - Cyclical slowdown: -0.18
- South Korea:
  - Structural slowdown: -0.06
  - Demand rebalancing: -0.41
  - On-shoring: -0.70
  - Cyclical slowdown: -0.35
- Germany:
  - Structural slowdown: -0.10
  - Demand rebalancing: -0.28
  - On-shoring: -0.57
  - Cyclical slowdown: -0.13
- Selected G20 examples (normalized impacts):
  - United States: Structural 0.00; Demand rebalancing 0.01; On-shoring -0.02; Cyclical -0.04
  - India: Structural 0.03; Demand rebalancing 0.01; On-shoring 0.07; Cyclical 0.0
  - Saudi Arabia: Structural -0.24; Demand rebalancing -0.49; On-shoring -0.01; Cyclical -0.29

### THE MATURING OF CHINA’S ECONOMY — key facts and context
- Growth averaged nearly 10 percent per year over the last four decades.
- Income per capita increased from $980 in 1990 to $14,239 in 2015 (at PPP prices).
- 500 million people have been lifted out of poverty.
- Post-GFC growth was supported by a policy-induced investment boom, financed by rapid credit growth; investment efficiency and corporate profitability have been falling.
- China is roughly half-way to high-income status (comparable stages: Japan in 1986, Korea in 1996, Taiwan Province of China in 1994).
- Indicators of weaker market institutions and a post-GFC productivity decline raise the probability of a medium-term productivity slowdown.

### Policy-relevant insights and implications
- China’s maturing implies lower but more sustainable growth; the global growth contribution from China is likely to moderate relative to recent decades.
- Different components of China’s transition have distinct implications:
  - On-shoring is unambiguously positive for China but can impose negative spillovers on trade partners with strong non-commodity trade links to China (notably Japan, South Korea, Germany).
  - Demand rebalancing can reduce vulnerabilities (less credit-financed investment) and, if public investment being cut is inefficient, can be neutral or beneficial for China; outcomes depend critically on the productivity of public investment.
  - Structural and cyclical slowdowns are negative for China and generate negative spillovers globally, with magnitudes varying by trade linkages and commodity exposure.
- For commodity-exporting countries, developments in China that lower commodity prices are a key channel for large negative spillovers (e.g., Mongolia, oil exporters, Saudi Arabia).
- For commodity-importing, less trade-exposed economies, lower commodity prices can offset weaker Chinese demand and in some scenarios produce small positive effects (e.g., United States, Japan in some scenarios).

### Concluding assessment
- While China will likely remain an engine of global growth, the boost to other economies will moderate as China’s growth slows, rebalances demand, on-shores production, and faces cyclical financial vulnerabilities.
- The magnitude and distribution of global spillovers depend on the relative importance of structural slowdown, on-shoring, rebalancing, and potential cyclical financial shocks, together with countries’ trade linkages and commodity-net-export positions.

*Source: _wp16212*

### 1. Economy-Wide Structural Slowing in China—Domestic Impact .......................................13

### 1. Economy-Wide Structural Slowing in China—Domestic Impact

### Introduction
- China accounted for one-third of global growth during 2000–14.
- Exports to China increased from 3 percent to 9 percent of world exports, and from 9 percent to 22 percent of Asian exports in the last 15 years.
- The 2009 policy stimulus package raised investment, boosting GDP growth and contributing to the increase in imports when global demand was collapsing.
- China’s transition is driven by:
  - a structural slowdown on the convergence path to high-income status;
  - moving up the value-added chain and on-shoring (moving production of previously imported goods to China);
  - demand rebalancing from stimulus-boosted investment towards consumption.
- Substantial uncertainty remains, amplified by the potential fallout from the stimulus-related credit boom and the risk of a deep cyclical slowdown.

### Empirical evidence on spillovers (literature summary)
- Cashin et al (2016): a permanent 1 percent reduction in China’s GDP growth translates into a reduction of 0.23 percentage points in global growth in the short-run.
- Dizioli et al (2016): for a 1 percent reduction in China’s growth, ASEAN5 GDP falls by 0.3 percent on average.
- Duval and others (2014): for a 1 percent fall in China’s GDP, a median Asian economy’s GDP falls by 0.3 percent and a median non-Asian economy’s GDP falls by 0.15 percent.
- Blagrave and Vesperoni (2016): a 1 percentage point decline to China’s final demand growth would reduce export growth by about 0.1–0.2 percentage points for the average country; impact largest in Emerging Asia.
- Ahuja and Malhar (2012): estimated spillovers from a reduction in fixed investment in China show impacts on some Asian economies proportional to their exports to China.
- Hong and others (2016): a simultaneous fall in investment with an increase in consumption (rebalancing) leads to a small reduction in the GDP of other Asian economies.

### Modeling approach
- This paper uses the IMF’s Flexible System of Global Models (FSGM, Andrle and others, 2015) to simulate the effects of:
  - the structural slowdown,
  - on-shoring,
  - demand rebalancing,
  - a cyclical slowdown,
  independently.
- Simulations use plausible assumptions about magnitudes but are illustrative given uncertainty.
- Note: FSGM focuses on trade spillovers and abstracts from financial spillovers. The latter could be notable for financial centers with high financial linkages with China, such as HK.

### Main projected spillover conclusions
- Overall magnitude:
  - Projected spillovers are not large overall; plausible structural developments in China will dampen positive spillovers to trading partners but the dampening is generally mild.
- Geographic concentration:
  - China’s closest trading partners are likely to suffer the most (stronger trade ties imply stronger spillovers).
- Demand rebalancing impacts (examples and magnitudes preserved as in source):
  - Korea: growth falls by roughly half of the decline in China’s growth in the first year.
  - Japan: growth falls by a quarter of the decline in China’s growth in the first year.
  - Indonesia: growth falls by a quarter of the decline in China’s growth in the first year.
  - Hong Kong SAR: growth is trimmed by about 80 percent of China’s growth showdown in the first year.
- Commodity-exporter impacts:
  - Mongolia: growth lower by over twice the drop in China’s growth (especially under demand rebalancing).
  - Australia: growth falls by a quarter of the fall in China’s growth (both trade and commodity channels).
- Cyclical slowdown (financial stress) impacts:
  - Short-run effects are largest under a cyclical shock.
  - Malaysia and Thailand: in the first year of the shock, impacts are about half of the decline in China’s growth.
  - Singapore and the Philippines: growth falls by about a third of the fall in China’s growth in the first year.
  - Mongolia: growth falls by 1.5 times the decline in China’s growth under a cyclical shock.

### Heterogeneity of effects and channels
- Different trends produce different cross-country profiles of spillovers:
  - Structural slowdown: mild dampening of world growth.
  - On-shoring and moving up the value-added chain: can crowd out producers from advanced economies while creating opportunities for lower-value-added producers in poorer developing countries.
  - Demand rebalancing (investment → consumption): harms commodity exporters that benefited from China’s investment boom but can benefit exporters of consumer goods; lower commodity prices may offset some negative effects for others.
- The country-level impact depends on the nature of exposures:
  - Dependence on China’s final demand, commodity exposure, and position in global value chains drive differential outcomes.

### Scope and limitations
- Results are illustrative and depend on assumed magnitudes of structural developments.
- FSGM abstracts from financial spillovers; countries with high financial linkages to China may experience additional effects not captured here.

*Source: _wp16212 - 1. Economy-Wide Structural Slowing in China—Domestic Impact*

### conclusions.

### _wp16212 - conclusions

### THE MATURING OF CHINA’S ECONOMY — key facts and context
- Growth averaged nearly 10 percent per year over the last four decades.
- Income per capita increased from $980 in 1990 to $14,239 in 2015 (at PPP prices).
- 500 million people have been lifted out of poverty.
- Post-GFC growth was supported by a policy-induced investment boom, financed by rapid credit growth; investment efficiency and corporate profitability have been falling.
- China is roughly half-way to high-income status (comparable stages: Japan in 1986, Korea in 1996, Taiwan Province of China in 1994).
- Indicators of weaker market institutions and a post-GFC productivity decline raise the probability of a medium-term productivity slowdown.

### Scenarios and modelled experiments (design and key parameter values)
- Structural slowdown (productivity-driven):
  - Growth slowing by 1.5 percentage points over a 5-year period.
  - Cuts the level of China’s GDP after 5 years by roughly 5 percent compared to no-slowdown.
- Tradable-sector vs economy-wide structural slowing:
  - Both lower China’s GDP by roughly 5 percent after five years; tradable-only slowing produces a depreciation of the exchange rate vs appreciation under economy-wide slowing.
- On-shoring:
  - Assumed reduction in the import content of China’s exports of roughly 5 percentage points over 5 years (operationalized as a 1 percentage point fall per year for 5 years).
- Demand rebalancing:
  - Modeled as transfers to LIQ households financed by cuts in public investment.
  - Assumes a decline in the share of public investment in GDP of roughly 7.5 percentage points over five years (operationalized as public investment declining by 1.5 percent of GDP each year for five years and remaining 7.5 percent of GDP permanently lower thereafter).
  - Lam and Wingender (2015) estimate additional social expenditures of 7–8 percent of GDP in the medium term.
  - Two variants on public capital productivity: (i) foregone public investment totally inefficient (no contribution to private productivity); (ii) foregone public investment mildly efficient (¼ of the model’s standard impact on private productivity).
- Cyclical slowdown (financial stress):
  - Asset prices (equities and real estate) fall by 10 percent in the first year, returning to baseline in the second year.
  - Corporate risk premium increases by 150 basis points in the first year, returning to baseline in the second year.

### Flexible System of Global Models (FSGM) — modelling features
- Semi-structural, annual, multi-region, general equilibrium model with stock-flow consistency and Blanchard-Weil-Yaari OLG households (includes LIQ households).
- Key blocks: micro-founded consumption (OLG + LIQ), Tobin's Q private investment, government absorption and public capital, reduced-form exports/imports, Cobb-Douglas potential output with trend TFP, Phillips-curve-based CPIX inflation, three commodity prices (oil, food, metals).
- Monetary policy represented by an interest-rate reaction function (flexible to fixed exchange rate, monetary union, or managed float); long-term 10-year rate based on expectations theory plus a term premium.
- Fiscal authority targets a long-run debt-to-GDP ratio; standard fiscal reaction function adjusts general transfers to maintain debt target, but function can be specified to use other instruments.

### Simulation results — China domestic impacts (selected highlights)
- Structural slowdown (economy-wide, 5-year, ~5 percent GDP loss):
  - Lower return to capital → lower private capital stock and investment.
  - Lower real wages → lower consumption; imports compress.
  - Exchange rate appreciates; current account improves.
  - Core CPI inflation falls slightly.
- Tradable-sector structural slowing (same GDP loss concentrated in tradables):
  - Exchange rate depreciates (relative price of Chinese tradables rises).
  - Larger reductions in real imports and exports versus economy-wide case.
- On-shoring (import content of exports falls 1 percentage point per year for 5 years):
  - Permanent rise in China’s output level via higher investment and capital stock.
  - Exchange rate appreciates; imported investment goods cheaper → further investment.
  - Core inflation initially rises despite appreciation; real imports fall, real investment rises strongly.
- Demand rebalancing (public investment down 1.5 percent of GDP/year for 5 years → transfers up):
  - If foregone public investment is totally inefficient: GDP falls slightly short run, then is 0.1 percent above baseline by 2020.
  - If foregone public investment is mildly efficient (¼ productivity effect): GDP is permanently lower; level of GDP in China is lower than baseline by 0.5 percent in 2020.
  - Shifts demand from investment to consumption → private consumption and private investment rise initially; exchange rate appreciates; imports fall.
- Cyclical slowdown (financial stress: -10 percent asset prices, +150 bps corporate premium in year 1):
  - Largest negative impact on China: private real investment falls dramatically (peak falls around double-digit percentages), consumption falls, imports compress sharply.
  - Current account improves initially; core inflation falls markedly.
  - Exchange rate eventually appreciates as NFA targets are restored.

### Simulation results — global spillovers (selected magnitudes)
- Economy-wide structural slowdown:
  - Global Real GDP reduced by roughly 1 percent after five years.
  - World excluding China Real GDP impact ≈ 10 percent of the decline in China.
  - Global real oil and metals prices lower by roughly 7 percent after five years.
- Tradable-sector structural slowing:
  - Global spillovers virtually identical in magnitude to economy-wide case; allocation across regions differs by trade exposure and terms-of-trade effects.
- On-shoring:
  - World Real GDP excluding China falls by a trivial amount; global GDP net effect slightly positive due to China’s output rise.
  - Global real price of oil and metals increase slightly over time.
  - Oil exporters’ GDP increases by about 15 percent of the increase in China’s GDP after 5 years.
- Demand rebalancing:
  - World excluding China GDP declines most when public investment does not contribute to private productivity.
  - Commodity price declines (when China’s GDP falls) buffer some spillovers for commodity-importing countries.
- Cyclical slowdown:
  - World excluding China GDP falls by 10 percent of the decline in China in the first year and is above baseline after five years.
  - Global real oil and metal prices fall by 3 percent in the first year; about 1 percent below baseline after 5 years.
  - Oil exporters suffer the largest and longest-lasting negative impacts.

### Country-level highlights (selected entries from Table 1; reported as GDP-level impacts normalized to a 1 percent change in China’s GDP level after 5 years; cyclical slowing shown for first-year impact)
- Mongolia:
  - Structural slowdown: -0.60
  - Demand rebalancing: -1.01
  - On-shoring: -0.47
  - Cyclical slowdown (first year): -1.0
  - Note: over 80 percent of Mongolia’s exports go to China; commodities dominate exports.
- Hong Kong SAR:
  - Structural slowdown: -0.69
  - Demand rebalancing: -0.42
  - On-shoring: -0.68
  - Cyclical slowdown: -0.3
- Japan:
  - Structural slowdown: -0.13
  - Demand rebalancing: -0.35
  - On-shoring: -0.91
  - Cyclical slowdown: -0.18
- South Korea:
  - Structural slowdown: -0.06
  - Demand rebalancing: -0.41
  - On-shoring: -0.70
  - Cyclical slowdown: -0.35
- Germany:
  - Structural slowdown: -0.10
  - Demand rebalancing: -0.28
  - On-shoring: -0.57
  - Cyclical slowdown: -0.13
- Selected G20 examples (normalized impacts):
  - United States: Structural 0.00; Demand rebalancing 0.01; On-shoring -0.02; Cyclical -0.04
  - India: Structural 0.03; Demand rebalancing 0.01; On-shoring 0.07; Cyclical 0.0
  - Saudi Arabia: Structural -0.24; Demand rebalancing -0.49; On-shoring -0.01; Cyclical -0.29

### Policy-relevant insights and implications
- China’s maturing implies lower but more sustainable growth; the global growth contribution from China is likely to moderate relative to recent decades.
- Different components of China’s transition have distinct implications:
  - On-shoring is unambiguously positive for China but can impose negative spillovers on trade partners with strong non-commodity trade links to China (notably Japan, South Korea, Germany).
  - Demand rebalancing can reduce vulnerabilities (less credit-financed investment) and, if public investment being cut is inefficient, can be neutral or beneficial for China; but outcomes depend critically on the productivity of public investment.
  - Structural and cyclical slowdowns are negative for China and generate negative spillovers globally, with magnitudes varying by trade linkages and commodity exposure.
- For commodity-exporting countries, developments in China that lower commodity prices are a key channel for large negative spillovers (e.g., Mongolia, oil exporters, Saudi Arabia).
- For commodity-importing, less trade-exposed economies, lower commodity prices can offset weaker Chinese demand and in some scenarios produce small positive effects (e.g., United States, Japan in some scenarios).

### Concluding assessment
- While China will likely remain an engine of global growth, the boost to other economies will moderate as China’s growth slows, rebalances demand, on-shores production, and faces cyclical financial vulnerabilities.
- The magnitude and distribution of global spillovers depend on the relative importance of structural slowdown, on-shoring, rebalancing, and potential cyclical financial shocks, together with countries’ trade linkages and commodity-net-export positions.

*Source: FSGM simulations.*

### References

### References

### Cited working papers and studies
- Ahuja, A., and M. Nabar, 2012, “Investment-Led Growth in China: Global Spillovers,” IMF Working Paper No. 12/267 (Washington: International Monetary Fund).
- Anderson, D., B. Hunt, M. Kortelainen, M. Kumhof, D. Laxton, D. Muir, S. Mursula, and S. Snudden, 2013, “Getting to Know GIMF: The Simulation Properties of the Global Integrated Monetary and Fiscal Model,” IMF Working Paper No. 13/55 (Washington: International Monetary Fund).
- Blagrave, P., E. Vesperoni, 2016 “Spillover implications of China’s Slowdown for International Trade,” IMF Spillover Notes No. 4 (Washington: International Monetary Fund).
- P. Cashin, K. Mohaddes, M. Raissi, 2016 “China’s Slowdown and Global Financial Market Volatility: Is World Growth Losing Out?” Working Paper 16/63, (Washington: International Monetary Fund).
- Dizioli, A., J. Guajardo, V. Klyuev, R. Mano, and M. Raissi, 2016 “Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies,” IMF Working Paper No. 16/170 (Washington: International Monetary Fund).
- Duval, R., K. Cheng, K. Oh, R. Saraf, and D. Seneviratne, 2014, “Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia,” IMF Working Paper No. 14/52 (Washington: International Monetary Fund).
- Hong, G., J. Lee, W. Liao, and D. Seneviratne, 2016, “China and Asia in Global Trade Slowdown.” IMF Working Paper No. 16/105 (Washington: International Monetary Fund).
- Kumhof, M., D. Laxton, D. Muir and S. Mursula 2010, “The Global Integrated Monetary Fiscal Model (GIMF) - Theoretical Structure”, IMF Working Paper Series, WP/10/34, available at http://www.imf.org/external/pubs/cat/longres.cfm?sk=23615.0
- Lam, W.  and P. Wingender. 2015. “China: How Can Revenue Reforms Contribute to Inclusive and Sustainable Growth?” IMF Working Paper No. 15/66 (Washington: International Monetary Fund).
- Ligthart, J., and R. Suarez. 2011. “The Productivity of Public Capital: A Meta-Analysis,” in W. Jonkhoff and W. Manshanden (Eds.) Infrastructure Productivity Evaluation. 5–33. New York: Springer-Verlag. (Springer Briefs in Economics Series, 1).
- Maliszewski, W., and L. Zhang, 2015, “China’s Growth: Can Goldilocks Outgrowth Bears?” IMF Working Paper No. 15/113 (Washington: International Monetary Fund).
- Maliszewski, W., and S. Arslanalp, J. Caparusso, J. Garrido, S. Guo, J. Kang, W. Lam, T. Law, W. Liao, N. Rendak, P. Wingender, J. Yu, and L. Zhang, 2016, “Resolving China’s Corporate Debt Problem” IMF Working Paper, forthcoming (Washington: International Monetary Fund).
- Mathai, K., G. Gottlieb, G. Hong, S. Jung, J. Schmittmann, and J. Yu, 2016, “China’s Changing Trade and the Implications for the CLMV Economies,” IMF Departamental Paper Series (Washington: International Monetary Fund).
- Cashin, P., K. Mohaddes, M. Raissi, 2016 “China’s Slowdown and Global Financial Market Volatility: Is World Growth Losing Out?” Working Paper 16/63, (Washington: International Monetary Fund).

### Model documentation and methodology
- Andrle, M., P. Blagrave, P. Espaillat, K. Honjo, B. Hunt, M. Kortelainen, R. Lalonde, D. Laxton, E. Mavroeidi, D. Muir, S. Mursula, and S. Snudden, 2015, “The Flexible System of Global Models – FSGM,” IMF Working Paper 15/68 (Washington D.C., International Monetary Fund), available at http://www.imf.org/external/pubs/cat/longres.cfm?sk=42813.0
- Kumhof, M., D. Laxton, D. Muir and S. Mursula 2010, “The Global Integrated Monetary Fiscal Model (GIMF) - Theoretical Structure”, IMF Working Paper Series, WP/10/34, available at http://www.imf.org/external/pubs/cat/longres.cfm?sk=23615.0
- Anderson, D., B. Hunt, M. Kortelainen, M. Kumhof, D. Laxton, D. Muir, S. Mursula, and S. Snudden, 2013, “Getting to Know GIMF: The Simulation Properties of the Global Integrated Monetary and Fiscal Model,” IMF Working Paper No. 13/55 (Washington: International Monetary Fund).

### IMF reports, regional outlooks, and country documents
- International Monetary Fund, 2011, “People’s Republic of China: Spillover Report for the 2011 Article IV Consultation and Selected Issues,” IMF Country Report 11/193.
- –––––––, 2012, “2012 Spillover Report,” July.
- –––––––, 2014a, “IMF Multilateral Policy Issues Report: 2014 Spillover Report,” June.
- –––––––, 2014b, “Regional Economic Outlook: Asia and the Pacific,” April.
- –––––––, 2015, “Regional Economic Outlook: Asia and the Pacific,” May.
- –––––––, 2016a, “China: 2016 Article IV Consultation”. IMF Country Report No. 16/270.
- –––––––, 2016b, “Regional Economic Outlook: Asia and the Pacific,” May.
- –––––––, 2016c, “ASEAN-5: Cluster Report,” IMF Policy Paper, June.

*Source: _wp16212 - References*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16212.pdf_