The IMF downgraded its projection for global growth next year, and predicted a third of the world economy is or will be in recession.  

It cited as major factors: a “cost of living crisis” driven by inflation, Russia’s invasion of Ukraine, and “the slowdown in China.”

China’s GDP grew 8.1% last year. This year that’s expected to be 3.2%

China did pretty well early in the pandemic, exporting a lot of stuff we in the U.S. were buying while we were stuck at home with cash to spend.

But domestic problems have now come home to roost, said Cornell economist Eswar Prasad.

“Determination to stick with zero-COVID policy has disrupted economic activity. The housing market has begun to unravel. And there are some signs of financial market distress,” he said.

Chinese consumers are wary of spending and investing, so demand is falling.  

“Where is the growth going to come from?” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “Is it going to be increased investment? That’s a problem because the local governments are heavily indebted with this property crisis. Is it going to come from net exports, selling to the rest of the world? Oops! Bad news! The rest of the world is slowing down.”

In past global crises, China kept chugging along, fueling recovery in other major economies. But Lovely said it’s in no position to do that, this time around.