China Is No Longer The World's Dominant Source Of Growth

thenews 2013.06.15 11:45

For years, China has been way out front as the world's most important source of economic growth.

While the country's mammoth economy – the second largest in the world – continues to grow at a rapid clip, it is cooling as other enormous economies heat up.

Specifically, Japan – the third largest economy – is on the receiving end of massive monetary stimulus. And the U.S. – the largest economy – is picking up.

From Societe Generale's new quarterly Global Economic Outlook report:

End of China growth dominance: China has long been the dominant driver of Asia growth, but this is no longer the case as the economy undergoes a structural slowdown. Japan has engaged policy stimulus and US recovery marks an additional positive for global growth. The PBoC has resisted the temptation to ease and, looking ahead, we expect to see tighter credit conditions in China act as an additional brake on economic activity. The Fed’s QE exit may amplify the situation, drawing out capital and placing downward pressure on the yuan. Structural reform will ultimately determine how painful the adjustment will be – the right reform efforts have the potential to smooth the adjustment.