Could China’s slowdown throw US economy into recession?

What happens in China doesn’t just stay in China. Flooding in northeastern China has caused numerous deaths and severe damage to infrastructure, homes, and crops. President Xi Jinping urges action to reduce damage. At least 90 rivers have risen beyond alert threshold, with 24 already flooded. Local governments must prioritize safety, flood prevention, and disaster relief. Restoration of farmland, infrastructure, dams, and disaster relief funds is crucial for residents’ return home or migration.

China’s post-COVID economic slump is causing concerns about the US economy, as the People’s Bank of China cut interest rates to boost growth amid a confidence crisis. This weakness could potentially spill over to the US, as President Biden called China’s economy a “ticking time bomb.” The US is attempting to avoid its own recession.

China’s worsening economy is affecting American companies, including DuPont, Dow, and Caterpillar, as well as countries dependent on China’s exports. The slowdown could potentially harm the global economy, as China’s supercharged economy may be descending into an extended slump.

China’s slowdown impacts the US economy, as it accounts for a fifth of the world’s output. A weakened China could lower gasoline prices and depress imports of machinery, electrical equipment, and medical devices. The global consequences of a Chinese recession are difficult to predict.

A Chinese recession resembling 2008’s Great Recession could harm the US’s future. However, China’s weak economy could benefit the US by lowering export prices and consuming fewer raw materials. Government efforts to boost economic growth could reverse downward pressure on US consumer prices.

What’s next?
The question now is how much worse it can get for China, the Japan Times reported. Unlike consumers in the West, Chinese residents “were left largely to fend for themselves during the COVID-19 pandemic” and so they never went on a “revenge spending spree” coming out of the crisis. Now youth unemployment is above 21% and worries about the property market mean that many Chinese may already feel economic pain as deep as during a recession. The new interest rate cuts are probably too small to make a meaningful difference.