Global Macro Service > Research Briefings > China

The global impact of a Chinese crisis

​How would a Chinese financial crisis affect the rest of the world? China is a large economy, whose financial system has grown dramatically over recent years. A financial crisis would have strong effects through trade channels, especially in Asia and for commodity producers: some of the effects of a weaker China on trade are already visible but these trends would be magnified and intensified, especially if China responded to a crisis with a depreciation of its currency. On the financial side, there is more uncertainty. China’s financial linkages to the rest of the world look more limited than for other large economies, which could reduce the global spillovers from a crisis. But spillovers to Hong Kong could be severe and the internationalised nature of Hong Kong’s banking system means that it could be a conduit to transmit financial stresses in China to the rest of the world. There are also risks to global business confidence and corporate earnings which would damage global equity markets.

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