Slowing growth in the Chinese economy carries major risks for emerging markets, and a drop in global trade could harm Europe and the United States as well, analysts warn.
Hours after Chinese authorities reported Tuesday that the economy grew by 6.9 per cent in 2015, the International Monetary Fund (IMF) warned of "spillover effects" from a sharper-than-expected slowdown in Chinese trade as it trimmed its global growth forecasts for 2016.
China grew last year at the slowest rate in a quarter century, according to the official figures, yet that pace was in fact a bit higher than what many analysts had been expecting.
It also lies within Beijing's target range as it looks to recalibrate the economy to a more sustainable model.
That helped calm markets, which have plunged in recent weeks on fears about the ability of Chinese authorities to manage the economy after poor handling of a meltdown on its stock exchanges.
"Meeting the economic growth target for 2015 goes some way to offset concerns that Chinese authorities' mismanagement of the stock market would spill over into their management of the economy in 2016," said analyst Jasper Lawler at CMC Markets UK.
But overall the outlook for the Chinese economy is for further slowdown.
The IMF did not cut its forecast for China, which sees it slowing to 6.3 per cent growth this year.
The slowdown in the world's second-largest economy, and the largest consumer of commodities, has caused the prices for raw materials to plunge, hammering nations which rely heavily on their production and export.
"Raw-material producing nations are already paying a high price" for the Chinese slowdown and the plunge in commodities prices this has caused, said Christine Rifflart, author of a study on emerging markets at the French Economic Observatory.
"The marked slowdown in China has caused collateral damage, resulting in very sharp recessions in raw-material exporting countries," she said.
"We are much more concerned about the perspective of emerging markets besides China, in particular the countries which produce raw materials" than China itself, said Jean-Michel Six, chief economist for Europe, the Middle East and Africa for Standard and Poor's rating agency.
Spillovers and repercussions
The IMF's chief economist, Maurice Obstfeld, also warned of the "large spillover effects" caused by the plunge in commodity prices.
His colleague Gian Maria Milesi-Ferretti, the deputy director of the IMF's research department, called for more attention to the "repercussions" of China's slowdown.
"And of course for the emerging world we have to watch very carefully what is happening in countries facing difficult economic situations, Brazil and Russia come to mind."
The French Economic Observatory's Rifflart pointed out that many commodity-exporting nations and companies have "very little margin for manoeuvre".
Many loaded up with debt in recent years when credit was cheap, often to meet higher Chinese demand.
Now with US interest rates rising credit has become more expensive and the dollar has strengthened against emerging market currencies, making it costlier to service dollar-denominated debt, just as the drop in commodities prices has hit revenues.
"The Chinese slowdown comes at a moment when emerging markets are already in a difficult situation," said Rifflart.
"I don't see sources for a medium-term rebound in growth for oil and raw material exporters," she said.
As global trade slows, other nations will be hit as well.
"There will be a domino effect via real effects such as slowing demand and a consequent drop in trade," said Rifflart.
In Europe, Germany is in the most exposed position as seven percent of its exports go to China. But problems there could quickly ricochet to its neighbours.
Moreover, Chinese companies may react to their slowing home market by dumping unsold inventory abroad — "a deflationary risk for the rest of the world," said Olivier Garnier, chief economist at French bank Societe Generale.
That prospect will not cheer the European Central Bank (ECB), which has been pumping 60 billion euros ($65.5 billion) of stimulus into the eurozone economy per month to ward off deflation.