Chinese slump “will lead to world recession” – Citi analyst

How’s this for a stark warning? The Chinese economic slowdown is expected to impact emerging markets for their exports and lead the world into a recession next year. The gloomy forecast comes from analysts at investment bank Citi.

The chance of such a global recession stands at 55%, it believes, as the slowdown in China drags economic activity below potential around the world.

Recent turbulence in China’s property and stock markets are seen as warning signs foreshadowing a recession in a capitalist market economy, while Citi predicts the country to be growing at just 4%, well below the official 7% growth target.

Willem Buiter, global chief economist of Citi, said excess capacity across much of China’s economy and a highly-leveraged private sector are troubling indicators. The government’s policy in response, he added, has also been “underwhelming”.

The Chinese government has tightened capital controls last month to prevent cash leaving the country after the RMB was devalued and banks have been advised to increase checks on all foreign exchange transactions.

Watch this space…

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