Concerns about China are increasingly likely to spread fear to financial markets and lead to poor stock performance in the United States and other developed countries, the International Monetary Fund said Monday.
Equity market contagion from leading emerging markets affecting advanced economies has risen 28 percent since the 2008 global financial crisis, The Wall Street Journal reported, citing IMF calculations.
The movements of all equity markets in 2015 were 80 percent attributable to markets in other countries, compared with a 50 percent linkage in 1995.
China’s financial system has relatively small direct linkages to economies such as that of the United States, compared with the banking and financial ties of other big economies, such as Japan’s.
Meanwhile, exports make up a relatively small part of the US economy, so worries about China’s economic health shouldn’t sink the outlook for most US companies.
But the IMF found that China appears to have a special ability to trigger market moves in other countries based on the release of economic news and data.
“We do see China as unique so far, in terms of news about its economic performance affecting markets elsewhere,” said Gaston Gelos, the IMF division chief for monetary and capital markets who headed the report on global financial market stability.
Sometimes, there is a fundamental connection, such as when commodity producers’ stocks decline on days when China’s industrial giants swoon, the report said.
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