Past Event

Will China’s slowdown bring headwinds or opportunities for Europe and Central Asia?

After years of rapid growth, China's GDP is expanding more slowly. There are fears about the global impact, but could there also be opportunities for Europe and Central Asia?

Date: April 29, 2016, 12:30 pm Topic: Global economy and trade

Summary

See below for video and materials.

Structural rather than cyclical factors lie at the center of China’s recent growth moderation.  China’s slowdown is a result of both slower expansion of production capacity and rebalancing, which entails a shift from investment to consumption, from low-skilled to high-skilled production, and from FDI to OFDI. Furthermore, China is catching up both in quantitative and qualitative terms. Qualitatively, productivity is catching up by looking at the fact that trade balance remains unchanged and growth continuing to remain at above 7.5%. Quantitatively, income gap is closing resulting from the price effect.

China’s slowdown and rebalancing bring both opportunities and challenges for Europe and Central Asia (ECA). The impact of slowdown would hurt resource exporters in the East, while reducing competition for exporters in the West. Real depreciation and changes in relative prices entail an opportunity for European producers competing with Chinese imports. Structural rebalancing towards consumption and high skilled production will benefit both West and East, the former through increased demand of high-skilled consumption goods and the latter through demand for low-skilled labor. Rebalancing entails a particular opportunity for the EU, which presently is experiencing a weak recovery with declining unemployment and rising export opportunities brought forward by real depreciation vis-à-vis Renminbi.

However, there are further challenges that China’s slowdown entail for ECA. First, China fueled Europe with cheap products which drove down the unit import price. Therefore, China’s declining growth may decrease consumer welfare in the EU. Second, exchange rate advantage might not last, since China could at any moment increase the money supply by easing its monetary policy. Third, unskilled labor industry in the EU might not gain competitive advantage vis-à-vis China anytime soon considering an ample supply of low skilled production that could replace China, especially the South East Asian countries. Europe’s competitive advantage lies in high-skill intensive industries and it is doubtful that China’s slowdown will cure wage inequalities within the EU.

Furthermore, policy challenges need to tackle the issue around excess industrial capacity in certain industries such as steel, and the implications of slowing FDI on the manufacturing sector and trade in general.

Event summary by Uuriintuya Batsaikhan, Research Assistant

VIDEO RECORDING

Event materials

Maurizio Bussolo – presentation

 

Schedule

Apr 29, 2016

12.30 - 13.00

Check-in and lunch

13.00 - 13.30

Presentation

Maurizio Bussolo, Lead Economist for Europe and Central Asia, World Bank

13.30 - 14:30

Comments and Audience Q+A

Chair: André Sapir, Senior Fellow

Jianwei Xu, Non-resident Fellow

14:30

End

Speakers

Maurizio Bussolo

Lead Economist for Europe and Central Asia, World Bank

André Sapir

Senior Fellow

Jianwei Xu

Non-resident Fellow

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevón

[email protected] +32 2 227 4212

Read about event
 

Upcoming Event

May
19
15:00

Three data realms: Managing the divergence between the EU, the US and China in the digital sphere

Major economies are addressing the challenges brought by digital trade in different ways, resulting in diverging regulatory regimes. How should we view these divergences and best deal with them?

Speakers: Susan Ariel Aaronson, Henry Gao, Esa Kaunistola and Niclas Poitiers Topic: Digital economy and innovation, Global economy and trade Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article
 

Blog Post

The EU needs transparent oil data and enhanced coordination

The EU lacks the coordination structure and transparent data necessary to most effectively navigate an embargo on Russian oil.

By: Agata Łoskot-Strachota, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: May 16, 2022
Read article
 

Blog Post

Now is not the time to confiscate Russia’s central bank reserves

The idea of confiscating the Bank of Russia’s frozen reserves is attractive to some, but at this stage in the Ukraine conflict confiscation would be counterproductive and likely illegal.

By: Nicolas Véron and Joshua Kirschenbaum Topic: Banking and capital markets, Global economy and trade Date: May 16, 2022
Read about event More on this topic
 

Upcoming Event

May
18
14:30

Is China’s private sector advancing or retreating?

A look into the Chinese private sector.

Speakers: Reinhard Bütikofer, Nicolas Véron and Alicia García-Herrero Topic: Global economy and trade Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author
 

Podcast

Podcast

The cost of China's dynamic zero-COVID policy

What does zero-COVID mean for both China and the global economy?

By: The Sound of Economics Topic: Global economy and trade Date: May 11, 2022
Read article More on this topic
 

Opinion

For Europe, an oil embargo is not the way to go

Even at this late hour, the European Union should consider taking a different path.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 9, 2022
Read about event More on this topic
 

Past Event

Past Event

What is in store for Euro area economies?

ECB Executive Board Member Philip Lane discusses the outlook for Euro area economies.

Speakers: Maria Demertzis and Philip Lane Topic: European governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 5, 2022
Read article More on this topic More by this author
 

Podcast

Podcast

Global trade Down Under

A conversation on the global trading landscape.

By: The Sound of Economics Topic: Global economy and trade Date: May 4, 2022
Read article More on this topic
 

Opinion

A tariff on imports of fossil fuel from Russia

A tariff on imports of Russian fossil fuels would allow Europe to hit Russia's energy sector without great suffering.

By: Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

External Publication

How to weaken Russian oil and gas strength

Letter published in Science.

By: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Ulrich Schetter, Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

Opinion

A phase out of Russian oil may be less effective than a tariff at reducing Putin’s rents

A punitive tariff on all energy imports from Russia would be a better choice than a gradually phased-in embargo on selected fuels.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article
 

Blog Post

How a European Union tariff on Russian oil can be designed

The European Union should apply a tariff on imports of Russian oil; it can be accompanied by a quota for a gradual, conditional phase-out of all Russian oil imports.

By: David Kleimann, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 29, 2022
Load more posts