Global Spillovers From China’s Slower Growth ‘Much Larger’ Than Anticipated

International Monetary Fund (IMF) Economic Counsellor and Director of Research Maury Obstfeld said that global financial conditions are tightening, and are particularly impacting emerging and developing markets.

WASHINGTON (Sputnik) — The impact of China’s slowing economy on the global market has exceeded the expectations of economists, International Monetary Fund (IMF) Economic Counsellor and Director of Research Maury Obstfeld stated in an IMF Survey interview on Monday.

"The global spillovers from China’s reduced rate of growth, through its diminished imports and lower demand for commodities, have been much larger than we would have anticipated," Obstfeld said.

Earlier on Monday, US stock prices tumbled, following a plunge in Chinese equities that spread to Europe amid fears that a slowdown in China’s manufacturing will drag down the global economy.

"Growth below the [Chinese] authorities’ official targets could again spook global financial markets — but then again, time-honored methods of enforcing growth targets could simply extend economic imbalances, spelling possible trouble down the road," Obstfeld explained.

The IMF chief economist added that global financial conditions are tightening, and are particularly impacting emerging and developing markets. Exporting countries will face even more problems, Obstfeld continued, as commodity prices, including energy, will resume falling.

Manufacturing surveys showed China's factory activity contracted at a sharp pace in December 2015. Tensions in the Middle East between Iran and Saudi Arabia, which boosted oil prices, were also cited as source of investor jitters.