[stock-ticker]

The Scariest Economic Chart In The World Right Now May Come From China

via Pedro Nicolaci da Costa

Move over, U.S. economy: The real action in global forecasting these days lies in figuring out what is happening in the world’s second largest economic powerhouse, China.

Wall Street is increasingly worried about slowing growth in foreign economies despite strong economic numbers at home. Federal Reserve Chairman Jerome Powell, too, recently identified weakening overseas economies as a major risk to the U.S. outlook.

And these days, when investors say overseas, they really just mean China.

After all, other emerging economies are viewed as too small individually for potential domestic crises to have large international spillovers. China, on the other hand, could shape the financial fate of nations around the world, both because of its size and increased level of integration into the world economy.

Peter Donisanu, investment strategy analyst at the Wells Fargo Investment Institute, offers the following basic but poignant chart highlighting just how sharply China’s economic growth pace has slowed in recent years, even if the current official estimates of 6.5% growth (whose accuracy is very much doubted by outside economists) are still robust for global standards.

Chinese economic growth has slowed sharply after two decades of runaway expansion.

The Chinese government has intervened heavily in the economy in order to soften the effects of weakening growth and industrial activity.

Investors are trying to figure out how much of that intervention has been helpful to the economy over the medium term and how much of it simply allowed domestic firms to become more indebted and even less productive or competitive.

Now that China is in the crosshairs of Donald Trump’s trade wars, fears are mounting that the economic drag for a country so reliant on exports could be severe. Its global ripples might also be significant.

“Assuming that the U.S. and China are not able to defuse trade tensions at the G20 meeting later this month, we believe that tariff-related impacts to the Chinese economy are likely to become evident in economic data during the final three months of 2018,” Donisanu writes in a research note.

“We believe that risk-off related market sentiment could quickly return should business and consumer confidence, household spending, industrial production, and trade all unexpectedly decelerate.”