Rajeev Dhawan, director of the Economic Forecasting Center of the J. Mack Robinson College of Business at Georgia State University, said that because of the Chinese stock markets’ fall and lower growth prospects, the repercussions have started to show up in markets for raw resources like oil, aluminum and iron ore, and will go further down the line into copper and food commodities.
“China is now, de facto, the factory of the world,” he explained. “When China is not doing well, its suppliers in Asia – Korea, Japan, Malaysia, Singapore, in the emerging economies of Brazil, Argentina, and Chile, along with Australia – they don’t do very well.”
The ripple effects of China’s economic problems will spread globally, eventually affecting the United States. But these problems won’t push the U.S. into a recession, Dhawan said.
“This is all about the growth prospects 6 to 9 months from now,” he explained. “These things don’t happen very quickly.”
With Greece, by the end of the July 11-12 weekend, we should know one way or the other as to whether the struggling country will drop out of the Eurozone, Dhawan said. And if it does, there could actually be a positive effect on the U.S. economy.
“Our markets are not going to get rattled by the Greek debt issue,” he said. “In fact, in Europe, there’s going to be a ‘flight-to-safety’ phenomenon that will happen. Both the German bonds as well as the U.S. bonds will benefit, which means that the interest rates will be lower over here.”
For more about the Economic Forecasting Center, visit http://robinson.gsu.edu/efc, as well as on Twitter at @efc_gsu. You can also follow the center on Facebook at https://www.facebook.com/economicforecastcentergsu.
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