A new report from the Center for American Progress concludes that a severe economic collapse in China could be a major threat to the world economy, potentially causing massive economic damage.
“The Chinese economy has already suffered from multiple shocks that will require more resources and capital to recover,” said Adam Gourley, a CAP staffer who led the study.
“We’re seeing a potential collapse of the global financial system.”
While the report says that a recession could result in a severe recession for the Chinese economy, the report points to a number of other economic indicators that could be particularly dire.
It says China’s GDP is expected to shrink by around 6% in 2020, and its gross domestic product is expected hit a staggering 9% decline in 2021.
China’s manufacturing industry is also set to contract by around 4%.
China’s labor force is expected shrink by 5% in the same year.
And its population is expected grow by about 2% in 2021, according to the report.
But the report’s authors note that economic indicators are only part of the picture.
The report also notes that the Chinese government is struggling to address the economic downturn and that China’s trade imbalance is growing rapidly.
The report also found that China will need to spend around $500 billion in 2017 to cover its budget shortfall.
That’s because the report projects that GDP growth will remain sluggish at around 3% in 2017.
And while China’s economy is projected to grow by around 2% this year, the country is already in recession.
The country is expected take a $400 billion hit to its budget deficit in 2019, according the report, a significant burden that could drive up the cost of imports, the authors noted.
“We have no choice but to keep investing in China,” Gourling told The Verge.
“I think this is a very dangerous time for the world and for the next 50 years.”
The CAP report was based on data from the International Monetary Fund, the OECD and the World Bank.