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McKinsey research finds the world becoming more exposed to China

18 July 2019
Economics&Markets
Energynomics

The world has become more economically exposed to China at a time when the Asian giant is increasingly relying on its own consumers to boost growth, according to a July report by consultancy McKinsey and Company.

The findings by McKinsey come as China is locked in a year-long tariff fight with the U.S. that has spilled into areas such as technology and security. Economists generally predicted that the Chinese economy — instead of the U.S. — will experience a larger hit from elevated tariffs partly due to the Asian country’s relatively heavier reliance on exports, according to CNBC.

But the report by McKinsey found that consumption contributed to more than 60% of China’s growth during 11 out of 16 quarters — from January 2015 to December 2018.

That means China’s economy has been reducing its reliance on trade as a source of growth. In fact, the study found that China’s net trade — the value of total exports minus that of imports — “actually made a negative contribution” to growth last year. “I think that’s one of the things they’re trying to do: To build a more robust, a more diversified economy,” Oliver Tonby, McKinsey’s chairman in Asia, told CNBC.

The consultancy studied how China and the world are linked through trade, capital and technology. It found that the increasing importance of Chinese consumers in supporting growth means manufacturers in the country are selling more to domestic consumers, and less to the world.

As a result, China exported just 9% of its output in 2017 — down from 17% in 2007, according to the McKinsey study. That shows China has become more self-reliant and less exposed to the rest of the world, the research found.

Autor: Energynomics

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