Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies

IMF Working Papers, August 9, 2016

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Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies

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Bibliographic details

• Authors: Allan Dizioli, Jaime Guajardo, Vladimir Klyuev, Rui Mano, Mehdi Raissi
• Published: August 9, 2016
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475524260.001

Key findings

• After many years of rapid expansion, China’s growth is slowing to more sustainable levels and is rebalancing, with consumption becoming the main growth driver.
• The transition is likely to have negative effects on China’s trading partners in the near term.
• Countries with closer trade linkages with China (Malaysia, Singapore, and Thailand) and net commodity exporters (Indonesia and Malaysia) would suffer the largest impact.
• Growth in affected ASEAN-5 economies would fall between 0.2 and 0.5 percentage points in response to a decline in China’s growth by 1 percentage point depending on the model used and the nature of the shock.
• The impact could be larger if China’s slowdown and rebalancing coincides with bouts of global financial volatility.
• There are also opportunities from China’s rebalancing, both in merchandise and services trade, and there is preliminary evidence that some ASEAN-5 economies are already benefiting from these trends.

Channels of spillovers examined

• Trade linkages with China.
• Commodity prices.
• Financial markets.

Quantitative impact and heterogeneity

• Estimated range: growth falling between 0.2 and 0.5 percentage points in response to a decline in China’s growth by 1 percentage point.
• Larger effects concentrated in:
  • Malaysia, Singapore, Thailand (closer trade linkages with China).
  • Indonesia, Malaysia (net commodity exporters).

Risk scenarios

• Baseline: China’s slowdown and rebalancing generate negative spillovers through trade, commodity prices, and financial markets.
• Elevated-risk scenario: Spillovers amplify if slowdown coincides with bouts of global financial volatility, yielding impacts larger than the baseline estimates.

Opportunities and preliminary evidence

• China’s rebalancing creates opportunities in:
  • Merchandise trade.
  • Services trade.
• Preliminary evidence indicates some ASEAN-5 economies are already benefiting from these trends.

Source: Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies, IMF Working Paper (August 9, 2016).

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