product, according to World Bank figures. But China is mainly a big exporter.It ships a lot of stuff to the rest of the world. And yet it is not a big consumer of the rest of the world’s goods, not yet anyway. Take the U.K. for example. Only 0.7% of British GDP is accounted for by sales to China. True, the British are not very successful in that market. We don’t make many things the Chinese want. Butit doesn’t mattervery much to most developed economies. Just 0.9% of the U.S. economy is generated through sales to China, and even for Japan the figure is only 2.4%. It matters a lot to Australia — 5.8% of its GDP depends on China, nearly all of it raw materials — but to no one else. So what happens if China slows down, or even goes into a full-scale recession? Its domestic economy will be hit hard. It won’t stop exporting, however. If times get tougher, its companies will be even keener to fill their order books with exports than they are now. So the pace of exports won’t slow down, and the supply chains that companies now depend on will not be
effected. Imports, of course, will be hit hard.But, as we have seen, the Chinese don’t buy much apart from raw materials from anyone else, so only places such as Australia and parts of Africa that ship the minerals that feed China’s factories will get hit by a slowdown. There is an interesting parallel with the Japanese crashof the early 1990s.It mattered a lot to Japan — it has never completely recovered from that downturn. But it did not make much difference to the rest of the world, and for the same reason — Japan was an exporter rather than an importer. By 1990, Japan had been growing at an average rate of 6.5% annually for 35 years (not quite as fast as the 9.9% average rate China has chalked up over the last 35 years, but close). Since then, its growth has been negligible. But that hasn’t made much difference to everyone else. Indeed, the 1990s, and the first part of the 2000s were a very strong period for the rest of the global economy. The fact that the world’s third largest economy was in permanent recession didn’t make a great deal of difference. Of course, you could argue there would be financial ramifications to a Chinese crash. Chinese money might be pulled outof the capital markets. Then again, that money may well have been de-stabilizing to the rest of the world. Chinese money flooding out into the rest of the world was one of the causes of the imbalances that led up to the crash 2008.Without it, the global economy might well be more stable, not less.The markets can worry about a China crash if they want to. But even if there is a hard landing, it won’t matter much to anyone else.