What Does China's Slowdown Mean for Georgia (and the Rest of the World)?
Tuesday, 19 April, 2016

On 18 April 2016 ISET hosted Dr. Donghyun Park, a principal economist with the Asian Development Bank (ADB), who presented his team’s research: the Impact of China’s Slowdown on the World Economy. The talk was attended by ISET students and faculty, as well as representatives of Georgia’s leading businesses and business associations.

Dr. Park reviewed China’s growth over the past several decades, emphasizing the role of its very strong entrepreneurial spirit in development. He cited the example of more than 70% of top Chinese university students opting to start their own business rather than working in a large corporation, as opposed to Japanese and Korean students, who harbor much more modest entrepreneurial ambitions.

Among possible factors contributing to China’s slowdown, Dr. Park listed demographics; a structural shift away from manufacturing and exports to services and domestic consumption; weaknesses in external demand; and convergence in wages. As China becomes less attractive for low-cost production, it has to shift to higher quality and more sophisticated manufacturing activities.

In recent years, China has been importing fewer electronic components, since it acquired the capability to produce them at home. Relatively labor-intensive assembly operations are gradually shifting to the poorer (and cheaper) Vietnam and Bangladesh. 

According to ADB’s analysis, China will continue to grow in future years, albeit at a slower pace. In case of a “soft landing”, China’s slowdown will have minimal impact on North America and Europe, including Georgia. The main (negative) impact will be felt by other Asian economies that are closely linked to that of China. A “hard landing” – a low (10%) probability event, according to Dr. Park – will be felt throughout the world.

We wish to thank ADB’s country director Yesim Elhan-Kayalar and the entire ADB-Georgia team for their support and contribution to ISET public lecture series.