How China’s tremors could weaken the world’s major economies

WASHINGTON, DC, United States (AP) — China is exporting something new to the world economy: Fear.

Global investors are quaking over the prospect of a devastating slump in the world’s second-biggest economy. And they’re fast losing confidence that China’s policymakers, seemingly so sure-footed in the past, know how to solve the problem.

The worst-case scenario is that a collapsing Chinese economy would derail others around the world — from emerging markets in Chile and Indonesia to industrial powers such the United States, the European Union, and Japan.

The free-fall in the stock markets, in the words of David Kelly, chief global strategist at JP Morgan Funds, is “Made in China.”

This year, the International Monetary Fund expects China’s economy to grow 6.8 percent, which would be its weakest peace since 1990.

China, which was posting doubledigit growth in the mid-2000s, is trying to engineer a daunting transition — from overheated growth fueled by exports and often-wasteful investment to slower growth built on consumer spending.

Official numbers show the Chinese economy grew 7 percent from January through March from a year earlier. Yet there’s growing suspicion that Beijing’s statistics are failing to capture the extent of the slowdown: Auto sales, electricity consumption, and construction activity are “all looking very weak,” Kelly notes.

“Everybody felt they could slow down to about 7 percent (annual growth) and that wouldn’t be the end of the world,” says Sung Won Sohn, economist at California State University Channel Islands. “It looks like it’s slowing down even beyond that.”

Big American companies such as Caterpillar and Chevron have acknowledged the damage that China’s troubles are causing them. China’s troubles have also depressed several technology stocks. Shares in Apple, which has enjoyed strong sales of iPhones and other products in China, are down nearly 20 percent the past five weeks.