US Economy Benefited From China’s Weakness, says Bundesbank

The Deutsche Bundesbank assessed that the American economy would likely take advantage of the steep decline of China despite the rest of world struggles. While the other possible scenario lies within the roots of the trading relationship. The largest economy in the world had imports worth more than $500 billion against China over the past year, the figures were three times higher as much as it exports to the country.

According to Bundesbank, the Asian countries decreased in prices due to sluggish growth which can stimulate US investment and private consumption and boost US output by around 0.2 percent for the next two years. The forecast further indicates that the Fed Reserve would respond strongly to the weakening of China compared to the setting of monetary policy by the ECB.

Meanwhile, the outlook for China’s economy continued to be positive in general due to a sharp increase in corporate debt and opaque financial linkages brings not negligible uncertainties based on the monthly report of Germany’s Bundesbank.

The central bank uses an adjusted model to estimate the world gross domestic product excluding China would curb by 1 percent in the next two years rather the expected 0.7 percent shown in the standard model. It also warned that the issued forecast has a chance to become optimistic. In addition to it, the models predict a secure Chinese yuan and ruled out the possible downturn of global economic reliance.