China no longer a global locomotive

Global economic growth in 2015 was characterized by a broad decline in commodity prices, weakening in currency valuations for emerging market economies, slower growth in China and uneven rates of growth in the developed economies of the world. It will still be several months before we have fourth quarter data for many countries, but by the time the dust settles, we expect full-year global GDP growth for 2015 to come in at 3.0 percent which, if realized, would be the slowest growth rate since the global recession in 2009.Turning the calendar over to 2016 should not change this backdrop, and many of these issues likely will remain key drivers of economic developments in the year ahead. Having said that, there do appear to be some shifting fundamentals, which we take into account as we frame our thinking and true-up our individual country forecasts for the coming year and beyond. Global central banks are setting off on very different policy paths in anticipation of inflation dynamics that run the gamut from stagnant price growth to high inflation. At the same time, stabilization in commodity-linked economies in the years ahead, continued steady U.S. expansion and improvement in Europe’s growth prospects suggest that global growth should trend up to its longrun average of 3.5 percent by 2017.

What role does China play in this global economic environment? In the past investments including real properties and production facilities as well as exports played a key role. Now the government wants to rebalance the economy focusing on consumption. In the process, economic growth has and will slow significantly. How will this effect the rest of the world including both advanced and emerging economies?