Ever since China’s last industrial slowdown in 2014, markets have been concerned with pinpointing where else a weakening Chinese economy may reverberate. Third-country trade data—a reasonable proxy for these ripple effects—show a notable impact in Europe at the end of 2017 consistent with weaker demand in China, but only initial signs of deceleration in Asian emerging markets. Trade tensions focused on China’s high-tech industrial policies may partially explain the differentiated impact. In the long run, structural reform will likely soften overall capital goods shipments to China.
