Why China's slowdown is not India's headache?

China growth slowdown to have marginal impact on growth

The Chinese economy is likely to pull down global growth further, as it struggles to reach its 5 percent target for 2024, but the impact on India may be limited, economists told Moneycontrol, as they noted that lower commodity prices could help curb the downside.

The Chinese economy grew 4.7 percent in the second quarter of 2024, its slowest pace since January-March 2023. The economy had expanded 5.3 percent in the first quarter of the year, down from its heady 7 percent growth days between 2014 and 2018.

“Global growth will be affected by China slowdown as it will affect trade. India not to be affected much as we are more of domestic economy,” said Madan Sabnavis, chief economist, Bank of Baroda.

The Chinese government is targeting a 5 percent growth for 2024, which experts point that the economy is likely to miss.

The data release corresponds with the Third Plenum, which is held every five years to decide on social and economic policies.

Experts note that a slowdown is likely to afflict imports coming into the country. Retail sales growth in the country at 2 percent in June was the weakest in 18 months.

A Moneycontrol analysis of UN trade data shows that the country cornered 10.6 percent of global imports in 2023. Its share in global imports is higher than what it was a decade ago.

China’s imports from the world have grown at a compounded annual growth rate of 2.7 percent between 2013 and 2023, compared with 2.4 percent growth in global trade over the last decade.

“Growth slowdown in China reverberates more widely across countries and could impinge on export volumes,” said Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership.

An IMF paper from November 2023, pointed out that a percentage point decline in China’s growth rate could reduce average growth in Sub-Saharan Africa by 0.25 percentage points.

IMF predicts growth in China to further slowdown to 3.3 percent by 2029.

“China slowing down alone is not really an issue, geopolitical tensions are more of a concern as many countries are slowing down,” said Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations.

Silver lining
Economists point to a silver lining in China’s slowing growth which may contain the impact for economies.

“Negative impact on growth could be curbed by softer commodity prices that are intricately linked to China economic cycle also and these need to be taken into account as well,” said Upadhyay.

The global commodity prices have witnessed a dip since June 2024.

The Bloomberg commodity price index declined 1.6 percent in June to 102.2 and was 0.9 percent lower for the first two weeks of July.