China game changer for global economy

By Choi Kyong-ae

Bank of Korea Governor Lee Ju-yeol delivers a keynote speech before presiding over a monthly meeting to discuss pending economic issues with economists at the central bank’s headquarters in central Seoul, Wednesday. / Yonhap

Korea’s central bank said Wednesday it will closely watch any developments in China’s economy, as financial uncertainties in the neighboring country could pose a major threat to the global economy.

“In the past, the United States used to lead global economic growth and its downturns used to result in worldwide recessions. But today, China holds the key to the direction of global economic growth,” Bank of Korea (BOK) Governor Lee Ju-yeol told economists.

Given China is Korea’s biggest trading partner and its sharply increased influence on the world economy, there is a growing need for countries to pay keen attention to its economy, the governor said in the January meeting held in the BOK’s central Seoul headquarters.

In the past decade, China, the world’s most populous country and Asia’s fastest growing economy, has contributed 35 percent of global economic growth, much higher than the 6 percent by the U.S., he said.

Early this year, falling oil prices and uncertainties surrounding the Federal Reserve’s planned rate hikes seemed to have pushed down domestic stocks and the won’s value against the dollar. But it was China’s slowdown and its stock meltdown that had the biggest impact on Korea’s financial market, Lee said.

Citing the Jan. 25 publication of TIME magazine with a cover story “Made in China: the Next Global Recession,” he expressed concerns over a possible global economic crisis arising from China.

In the BOK’s monthly discussion with economists, participants usually discuss a variety of pending issues without focusing on one topic. But this month, China and its economy topped all the other issues.

Participants included Hyundai Research Institute head Kang In-soo, LG Economic Research Institute economist Shin Min-young and Korea Institute of Finance economist Park Jong-kyoo.