When China Sneezes: Project Syndicate

Cases of the new coronavirus, confirmed in more than 30 countries, strikes when the global economy is already vulnerable and many countries struggle with debt, stagnant growth, reduced industrial output and job creation. COVID-19 has triggered an unexpected disruption to supply and demand. China is at the center of global value chains, explains Stephen S. Roach, an economist based at Yale University. ”Recent research shows that GVCs account for nearly 75% of growth in world trade, with China the most important source of this expansion,” he writes, adding that China is also “the largest source of external demand for most Asian economies.” He adds, “with China having accounted for fully 37% of the cumulative growth in world GDP since 2008 and no other economy stepping up to fill the void, the risk of outright global recession in the first half of 2020 seems like a distinct possibility.” Cases in China now exceed 80,000, though the pace of infection has slowed. Roach warns that the economic response will probably lag as central banks have few tools at their disposal with interest rates at low levels. – YaleGlobal