IMF: China impact worse than thought

The International Monetary Fund says China’s slowdown and other factors are pushing the global economy to much deeper trouble than originally thought. 

“China's transition to a lower growth, while broadly in line with forecasts, appears to have larger-than-previously-envisaged cross-border repercussions, reflected in weakening commodity prices and stock prices," the fund said in a report.

It was released ahead of a meeting by Group of 20 (G20) finance ministers in Ankara on Friday and Saturday.

Emerging economies are especially exposed to greater risks from the turmoil which has sent the prices of commodities such as oil and copper sliding and led to sharp reversals in financial markets, it added.

The oil price slump, caused by Saudi production at full capacities, is hurting emerging market economies. China’s devaluation of its currency and strong dollar is dealing an additional blow.

The IMF warned that commodity prices would sink further and the dollar continue to rise, saddling companies with bigger debts.

Many countries and corporations that have borrowed in dollars but operate in local currencies are on course to see debts piling up.

Global markets are further hit by confusion over whether the US Federal Reserve would raise interest rates. Raising rates could hinder the economic growth but not lifting it could signify that the global economy remains exceptionally weak.

IMF Managing Director Christine Lagarde has said this year's global growth would be "likely weaker" than forecast.

The Chinese government’s intervention to devalue the yuan triggered fears the world’s second largest economy might be in a worse shape than thought.

China has emerged as the bellwether of the world’s economic health and its market developments are having far-reaching effects.

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