## Spillovers from the Maturing of China’s Economy

_IMF Working Papers, November 8, 2016_

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## Bibliographic details
- Authors: Allan Dizioli, Benjamin L Hunt, Wojciech Maliszewski
- Published: November 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475552225.001

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### Summary and framing
- China’s transition to a new growth model continues and the impact has been felt across the globe.
- Several trends contribute to the ‘maturing’ of China’s economy:
  - i) structural slowing on the convergence path;
  - ii) on-shoring deepening;
  - iii) demand rebalancing from investment towards consumption.
- In the short term, financial stress may lead to a cyclical slowdown.
- The paper discusses and quantifies spillovers to the global economy from these different developments using model-based analysis.

### Methodology
- Analysis undertaken using the APDMOD and G20MOD, both modules of the IMF’s Flexible System of Global Models.
- The paper conducts scenario and quantitative analysis to assess spillovers under plausible values of the identified developments.

### Key findings
- For plausible values of the maturing developments in China, the overall impact on the global economy is not large.
- The impact on China’s closest trading partners and commodity exporters can be notable.
- Financial-sector stress in China could produce a cyclical slowdown with additional near-term spillovers.

### Thematic findings and subject coverage
- Commodity prices: affected by China’s demand rebalancing and on-shoring deepening.
- Expenditure and public investment: rebalancing from investment towards consumption alters global demand composition.
- Exports and international trade: shifts in China’s import demand and on-shoring affect trading partners.
- Financial sector policy and analysis: short-term financial stress is a channel for cyclical spillovers.
- Prices and public-private partnerships: changes in investment and public investment spending are relevant for spillovers.
- International business cycle and growth convergence path: structural slowing is tied to China’s maturing process and global cycle interactions.

### Policy implications and recommendations
- Close monitoring of financial-sector risks is important given potential cyclical slowdowns.
- Trading partners and commodity exporters should assess exposure to demand composition changes from China’s rebalancing.
- Policy frameworks should account for muted global aggregate impact but potentially sizeable localized effects for close partners and commodity-dependent economies.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/spillovers-from-the-maturing-of-chinas-economy-44381_