What Would be the Impact if the Chinese Economy Tanked?

Monday, February 3, 2014 10:00
Posted in category Going to Market, The Big Picture
Comments Off on What Would be the Impact if the Chinese Economy Tanked?

One of the most interesting conversations I ever had was over drinks with a European central banker looking to learn about the reach of China. His core questions was “If China imploded, what could be the impact…. “, and for a couple of hours we worked through a few industries. How far their supply chains reached into China, regardless of where the products were sold, as well as what level of dependence those same firms/ industries had on China for top line growth.

I’m sure it is a conversation many have had, but for me the big lesson was that few take the time to think about it enough, and regardless of what your feelings are on China’s potential for a “hard landing”, it is something I have always advocated creating scenarios for… because if nothing else, I personally find that I learn more through disaster response planning, and honestly speaking, it is quite easy to have a conversation about the end of the China dream. Always has been, and I have yet to find myself in a room where someone else wasn’t interested in joining.

Anyway, with the talk of a hard landing has begun popping up again, I found the infographic in the CNBC article A hard landing in China: The risks in one graphic interesting as a starter point for those looking to understand the challenges that China is facing and implications should all hell break loose. It has a number of interesting components, the most interesting I pasted above, and I would recommend readers to take the 2 minutes to look through it and consider what the impact would be were China to slow down.

Following that, how could you turn that into an opportunity. Because in reality, while a slowdown would have an impact globally, it could also be an opportunity for many to reinvest in China or buy commodities on the cheap.

Update: The Sydney Morning Herald article China’s banks ‘could trigger global meltdown’ has some sobering data worth reading through.  As I mentioned, I do not believe China will ever lose a bank… it will lose the banking system…

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