China the biggest risk to world economy, says Societe Generale
An ongoing stock market slump and a currency devaluation last month have fuelled fears of a hard landing by the world’s second biggest economy unleashing a so-called black swan – an unexpected shock – on world economy.
Is China a replay of the US in 2008, or Southeast Asia in 1997?
An ongoing stock market slump and a currency devaluation last month have fuelled fears of a hard landing by the world’s second biggest economy unleashing a so-called black swan – an unexpected shock – on world economy.
Though Chinese leaders have tried to talk up the market with assurances that the stock market bubbles have been unwound, the currency is stabilising and the economy will keep growing at 7 per cent for another 4 to 5 years, many still remain unconvinced, and Societe Generale is among those keeping a wary eye on China.
The French multinational financial institution sees a 30 per cent probability of China’s hard landing and assigns a slightly higher, one-third, chance of China triggering a global recession.
“On the major risks that we see over the coming year, China dominates the downside risks while US dominates the upside,” says a research report by Societe Generale.
China fears have already hit the broader emerging markets. The MSCI Emerging Market Index fell 12.5 per cent in August, the fourth straight month of decline.