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By Jeremy Glaser and Robert Johnson, CFA | 03-12-2014 12:00 PM

Expect a Further Slowdown in China

Recent data suggest more worrisome conditions for the Chinese economy, and investors shouldn't count on the country for near-term growth, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. Emerging markets have been in focus throughout 2014, but for the last couple of weeks China's growth has been under particular scrutiny. I'm here today with Bob Johnson, our director of economic analysis, to take a look at the data and see what a slowing China could mean for the U.S. and global economy.

Bob, thanks for joining me today.

Bob Johnson: Great to be here today.

Glaser: Let's start with putting this into context of how important China really is to the U.S. economy. We hear about these growth rates but don't really often talk about the full size of the Chinese economy. Just why do we care about these numbers?

Johnson: Let me talk broadly about China. I mean it is the world's second-largest economy, and if you look at the data that means they are extremely important. The U.S. economy is about $16 trillion a year. The eurozone's probably a little bit more than that when you put it all together. And then China is coming in next at kind of $8 trillion to $9 trillion range. So it's a very big economy, and it certainly has grown.

And certainly if you took it by single country, it is the second-largest economy. And in terms of import/export data, which is in importance to the rest of the world, interestingly in 2013, they surpassed the U.S. as being the largest world trade country. And that's adding the exports and the imports together. And that was about $4.1 trillion in 2013, just slightly ahead of the $3.9 trillion of the U.S. So they influence a lot of the world economy.

Glaser: But specifically from the U.S. perspective, how much of our gross domestic product comes from China?

Johnson: That's a very interesting question and in preparation for that, I looked back at some of the data. And it was kind of interesting. For years I've told people that China is about 1% of U.S. GDP. You really got to worry more about Europe, which is 3% of our GDP, and Canada and then Mexico are probably even a little bit more than that.

Looking at the data, China now has gone from about 1% of U.S. GDP to about 1.9% over the last three or four years. So it's more important than it used to be, but it's still not as important as the European Union, not more important than Canada, and about the same importance as Mexico.

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