Does the huge growth in the Chinese economy in recent years and the West’s still growing reliance on trade with China pose a risk to the global economy? Does globalisation have a huge weak link?

With the world economies so intertwined and co-reliant on one another, it was always the case that individual countries’ economies took their lead from the USA as the world economic driving force. If the US economy was struggling, stock and currency markets, interest rates and employment around the world would feel the pain. That responsibility is now shared to a great extent with China since our global reliance on its growing economy has arguably reached a point where any failure would have huge repercussions for countries such as the UK. This shift has a problem; the USA has in recent history been a stable, sure bet. China is an economic child in comparison and undoubtedly has some painful lessons to experience.

It is not only that a huge proportion of our goods are imported from China and any significant break in supply would leave us short of a massive range of goods. In fact such a wide range would be affected; any attempt to list them would be futile.

Since the worldwide financial downturn, China has been a beacon of growth in a struggling world. As such it has become a massively significant market for export of our own goods as Chinese consumption stepped up to take the place of dwindling appetites at home. So much income and employment in our own economy is being fed by demand for goods in China.

So, what happens if China falters? Its growth is already slowing and its stock market has plunged. Workers fed up of promises of riches for working in city factories are returning disillusioned to the traditional life of the countryside. Human rights are still a long way down the country’s priorities compared to trade and profit. Our demand for those of its products deemed non-essential has dropped and shows no real signs of returning. This reduces the money entering its economy from abroad which in turn reduces the demand for our exports. When does such a cycle become critical?

Is it ever possible that China could have a huge recession of its own? Could it even have an uprising such as those in the Middle East? Its population has been temporarily pacified by a glut of wealth but it will not last forever and they are many freedoms short of happiness.

Suppose we were for some reason cut off from Chinese trade. Our own exports would drop, threatening employment and another recession. We would lose the source of so many products, many of which we no longer own the means to produce. How long before significant damage is done to our economy? How long before shortage of goods becomes critical, leading to civil unrest, looting or worse?

I know it is easy to argue that this is all far-fetched un-realistic nonsense, but then this is a what-if query I am posing here. Globalisation appears to be a mesh of connections but having come to depend on it, how many connections can we lose and how big do they need to be before it disintegrates completely?

 

Updated 20/10/15 13:44

There is some timely coverage on Sky on the subject of the stalling Chinese economic growth.  From the article:

Until a couple of years ago it had been widely considered that anything below 8% annual growth would undermine social cohesion

and China has reported a growth rate of 6.9%, slightly better than the expected 6.8% but widely believed to be a doctored figure anyway with the real figure being more like 3%.