Latest Quarterly Bulletin from the Bank of England
The BOE has an article in the bulletin that asks "How could a shock to growth in China affect growth in the United Kingdom?"
China's importance to the global economy has grown in recent years. GDP growth in China has slowed in recent years and some further slowing is expected as the Chinese authorities rebalance the economy towards consumption and away from investment. This article explores two key questions: how might that slowing affect UK growth and how would any shock be transmitted to the UK?
Using an empirical model, the article concludes that, today, a negative 1% shock to Chinese GDP is likely to lower UK GDP by 0.1%. This is one third of the impact of an equivalent slowing in the euro area, where our trade links are ten times bigger. These estimates are, though, likely to underestimate the overall impact, particularly in the event if a sharp slowdown in China, where the spill-overs to others countries would probably be larger than the model suggest.
The interesting and topical point there is that our trade with the EU is 10 times greater than that with China. Surely an imbalance that needs correcting. Expect that to be thrown into the Brexit campaigns.
Full article here
