China's VUCA situation

Rafael Alunan 3rd

CHINA’s current economic situation is fragile. Reports by various media sources paint a gloomy picture. Household spending is reportedly less than expected. Commercial borrowing and investments have dropped. Unemployment in the youth sector has spiked to the point that Beijing decided to stop releasing the data. A major slowdown in China raises a lot of questions for the global economy as well as tough consequences for everyone who benefits from Chinese consumer and manufacturing demand.

A growth shock would surely affect regional trade, financial flows and FDIs. Economies with direct trade exposure to Chinese demand for a range of goods may bear the brunt of a sustained slowdown in China. Slower economic growth would translate, for example, into diminished demand for iron ore, copper, aluminum and other base metals. China is one of the country’s top three trading partners. Sixty-eight percent of China’s nickel ore imports are from the Philippines. China is arguably the Philippines’ biggest source of imports. It’s also the country’s third biggest export destination.