China’s growth is slowing down. This also creates worries for other countries as China is an increasingly important trade partner for many. The remarkable GDP growth of China started with +14.2% in 1992 and has dropped to +6.9% in 2017. Although this decline is not to be neglected, it is also not to be overestimated. To see why, we look at the size of the Chinese economy over time, and the two effects this has.
The size of the Chinese economy in 1992 was only 1.036 trillion (constant 2010 US dollar)1, while the global economy had a size of 39.166 trillion. By 2017 the Chinese economy counted 10.161 trillion, and the global economy 80.078 trillion. Firstly, this means China’s share of the global economy rose from 2.6% to 12.7%. By now, if only for its sheer size, China has become important to many countries. On the other hand, in 1992 China only contributed 129 billion to global growth (14.2% x 1.036 trillion), while it contributed 656 billion in 2017. A five times increase. And compared to the total size of the global economy China contributed just 0.3 percentage points to growth in 1992, while it contributed 0.8 percentage points in 2017. In summary, because the Chinese economy is so much bigger, it still contributes more to global growth than it did in the days of more than ten percent growth, despite slowing down.
For policymakers this means two things. First, that China is more important than in 1992 is certain. It is a much more important trading partner than back then. Second, because the Chinese economy is much bigger now, lower growth still means it contributes massively to nominal global growth. So the slowdown of China may not be perceived as a slowdown at all by other economies.