ANALYSE FRA NATIXIS
What are the transmission mechanisms from the Chinese crisis to the euro zone? Author: Patrick Artus We use the term “Chinese crisis” for the very marked slowdown in Chinese growth. We try to find the transmission mechanisms from this crisis to the euro zone, and we see five such mechanisms: (1) The slowdown in global trade, due to the decline in Chinese imports, which is weakening euro-zone exports;
(2) The depreciation of the exchange rates of emerging countries other than China, triggered by the Chinese crisis and by the incipient depreciation of the RMB, which are weakening the value of euro-zone exports to these countries;
(3) The fall in commodity prices, caused by the slowdown in activity in China, which is having a twofold effect on the euro zone: positive effect (fall in the cost of commodity imports), negative effect (decline in exports to commodity-exporting countries);
(4) The global shift to more expansionary monetary policies as a reaction to the fall in growth and inflation, leading to even lower long-term interest rates, which is positive for the euro zone;
(5) The drop in share prices in euro-zone countries due to the downward revision of global growth, which is expected to generate a negative wealth effect on consumption and corporate investment.
So we can identify three negative effects of the Chinese crisis (global trade, depreciation of emerging countries’ currencies, share prices), one positive effect (monetary policies), and one ambiguous effect (fall in commodity prices with one direct positive effect, but also one negative effect due to the problems of commodity-exporting countries)
