China Slowdown Risks Spillover Effects on Global Economy, Yellen Warns
The United States Treasury Secretary Janet Yellen has cautioned that China’s economic slowdown could have ripple effects across the global economy. However, she does not expect a recession in the U.S.
Global Economic Interconnectedness
Yellen highlighted the interconnected nature of the global economy, stating that "many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia." She noted that China’s slow growth can have negative spillovers for the United States.
China’s Economic Slowdown
The Treasury secretary pointed out that the economic data from China has been weaker than expected. In a recent interview with Bloomberg Television, Yellen stated that "relatively weak" consumer spending was a notable aspect of the country’s post-COVID reopening. The July 17 figures showed that gross domestic product rose less than one percent from the first quarter, while retail sales for June rose less than forecast.
Consumer Behavior in China
Yellen attributed the relatively slow economic rebound to consumers building back their savings buffers. She noted that "it looks like consumers are more focused on building back their savings buffers" following the country’s post-COVID reopening.
De-escalating Tensions with China
During her visit to India for meetings with counterparts from Group of 20 economies, Yellen spoke about the need to de-escalate tensions with China. However, she indicated that tariff reductions would not be on the table. The Treasury chief emphasized that the underlying concerns regarding unfair trade practices have not yet been addressed.
National-Security Considerations
Yellen also mentioned that any moves to curb outbound U.S. investment to China would be narrowly targeted and based solely on national-security considerations. She stated that "there is a good chance that we will" go ahead with controls on outbound investments.
U.S. Economic Outlook
Despite the global economic concerns, Yellen expressed optimism about the U.S. economy. In her interview with Bloomberg Television, she stated that growth has slowed, but does not expect a recession in the United States. The Treasury secretary pointed out that inflation has fallen to 3%, the lowest level in more than two years.
Multilateral Development Banks
During her visit to India, Yellen also sought progress on debt relief for poorer nations and reforms to multilateral development banks. She emphasized the need to work towards building on the groundwork laid during her recent visit to China.
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