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The effects of China's economic slowdown are spreading globally and resulting in various winners and losers, BofA says.
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A weaker China, BofA said, helps lower US inflation via a strong dollar but could also spur supply snags.
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Meanwhile, some commodity exporters in Latin America are taking a hit from China's slowdown.
China's economic growth is sputtering, and its effects have rippled into the rest of the global economy with mixed results.
According to a Bank of America note to clients, China is facing headwinds that will set the tone for the US, Europe and Latin America as they respond to currency and commodities markets.
"Short-term factors include China's zero-Covid strategy, deep problems in the property market and a weak labor market (particularly for young workers)," BofA analysts wrote Friday. "Meanwhile, unfavorable demographics and a low return on investment after years of rapid infrastructure development pose structural challenges to growth."
US
China's economic weakness presents both good and bad news for the US. On the positive side, China's yuan has weakened about 8% against the dollar over the past year on aggressive Fed rate hikes and expectations the US economy will outperform others around the world.
That will help ease inflation in the US, as research shows that a 10% appreciation in the dollar lowers personal consumption expenditures inflation by about 0.4 percentage points, BofA said.
However, China's COVID-19 lockdowns could weigh on US markets via supply-chain disruptions. Shipments to the US have declined to their lowest level since June last year, possibly signaling fresh supply issues, BofA noted, which could add pressure on US goods inflation.
Meanwhile, a weaker Chinese economy could help the US eventually distance itself from its geopolitical rival.
"There is a bipartisan push in the US to decouple from China," according to Bank of America. "While concrete steps have been taken in some sectors, the aggregate trade data do not show clear signs of decoupling."
Europe
China mainly impacts Europe through demand for its exports and commodity prices. Should China ease lockdowns, it could contribute to the easing of supply bottlenecks in Europe and reduce price pressure on non-energy goods, BofA explained.
But China will "contribute considerably less to the outlook risk balance than they usually would," the analysts said, with a recession on the horizon due to the worsening energy crisis.
"In the current backdrop, the marginal impact of the China slowdown on [Central and Eastern Europe] GDP is likely limited, as Europe is already facing the risks of production cutbacks due to gas rationing in the winter."