Spillovers from Large Emerging Economies: How Dominant Is China?

IMF Working Papers, January 24, 2025

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Model: Bayesian Global Vector Autoregression (GVAR) model.
Coverage: 63 countries.
Shocks analyzed: demand-side and supply-side shocks.
Focus: comparative influence of China versus other G20 emerging markets (G20-EMs) on global variables.

China's domestic shocks have significantly larger and more pervasive spillover effects on:
- global GDP,
- inflation,
- commodity prices.
Spillovers from other G20-EMs are more regionally contained with modest global impacts.
The study underscores China's outsized role in shaping global economic dynamics.
Other G20-EMs have limited capacity to mitigate potential negative implications from China's economic slowdown in the near term.

Global macroeconomic outcomes (growth, inflation, commodity prices) are particularly sensitive to shocks originating in China.
Regional policy coordination may be more effective than global coordination for spillovers originating from other G20-EMs, given their more contained impacts.
Vulnerabilities to a Chinese slowdown are a key risk for global economic stability.

Subject areas: Economic theory; Emerging and frontier financial markets; Financial markets; Financial sector policy and analysis; Global value chains; Globalization; Oil prices; Prices; Spillovers; Supply shocks.
Keywords emphasized by the authors: China's contribution; domestic shock; Emerging and frontier financial markets; Emerging Economies; Global; Global transmission; Global value chains; Growth Spillover; GVAR model; IMF working paper No. 25/27; Oil prices; outsized role; Spillovers; Supply shocks.

IMF Working Paper No. 2025/027 (January 24, 2025) — "Spillovers from Large Emerging Economies: How Dominant Is China?"