China growth could drop by half in 2012 because of the euro crisis warns imf

“The risks to China from Europe are both large and tangible,” and “China would be highly exposed through trade linkages,” said the report, which was published by the IMF resident representative office in China.

The IMF forecast for China's annual growth in 2012 has already been lowered to 8.2% from a previous forecast of 9% but if Europe's performance is worse than expected then China's export-driven economy would be badly hit.

“In the absence of a domestic policy response, China's growth could decline by as much as 4 percentage points relative to the baseline projections [of 8.2%] leading to broad-based consumer and asset price deflation,” the report warned.

That would entail a growth rate far below the level the ruling Communist Party has identified as necessary to create enough jobs for it to maintain its grip on power.

Source: MercoPress.com