Back in July I noted
the global downturn is hitting advanced economies much harder than the rest of the world
While that was true then, it is less so now. There is an interesting article on the FT from a few days ago on how the recession has spread to China.
The post-1997 global balance is breaking down, and the world is lurching drunkenly to find a stable new balance. Until now, Chinese overproduction has balanced US overconsumption, leading to Chinaâ€™s massive trade surplus and capital account deficit. Inevitably, however, a reduction in US overconsumption, a necessary consequence of the financial crisis, must force a corresponding reduction in overproduction elsewhere, and China, like it or not, will have to bear the brunt of the adjustment. The US and Europe must design their fiscal and monetary policies in part to ease Chinaâ€™s adjustment, which will otherwise be extremely difficult.
It’s continued over here
As Kevin O’Rourke, the same, points out over on the Irish Economy Blog Ireland being a small open economy heavily dependent on foreign demand for our exports, China’s problem’s are not a world away from our own.