According to the old maxim, 'When the US sneezes, the rest of the world catches a cold'.
The implication is that, whenever US markets shift, sooner or later the rest of the world's markets fall into line.
But as China's growth over the past couple of decades has shown, the economic giant now may be the one to affect global markets.
This influence can be attributed in part thanks to the Belt and Road Initiative introduced in 2013, which saw large-scale development and investment initiatives across East Asia and Europe. This significantly boosted regional and global economies.
That was then; now, however there is a regional slowdown in Asia Pacific and in western economies - and even if fingers are not directly pointing at China, there's certainly movement in that direction.
Latest statistics from the International Monetary Fund show advanced economies are expected to slow from 2.6 per cent in 2022 to 1.4 per cent in 2024.
Emerging market and developing economies are projected to have a more modest decline in growth from 4.1 per cent in 2022 to 4.0 per cent in both 2023 and 2024.
But even though this compares favourably with western markets, the IMF indicated that lower economic growth in other countries has been influenced partly by China's structural slowdown.
According to the IMF, the post-Covid rebound Chinese economy, which helped fuel its growth during 2023, is projected to lose momentum in 2024.
The economy is set to grow at a slower rate of 4.6 per cent - branded by economists as a 'structural slowdown' - which is taking the Asia Pacific region's overall growth projections to 4.2 per cent.
MSCI China, which captures large and mid-cap representation across the Chinese market, is down 12 per cent over the same period as worries about the nation’s sluggish real estate sector and its economy continue to dominate.
Reasons for the slowdown
There are reasons for the slowdown in China.
During a recent Horizons briefing, Legal & General Investment Management's chief investment officer Sonja Laud, said China had been following a "slightly different dynamic" than other countries following the first wave of Covid-19.
She explained: "They had their severe lockdown later than other countries and came out into normalisation a lot later.
"We are now seeing a balance sheet recession in terms of over-investment in property in particular over the past 10 years, which is being unwound.
"We have been cautious for a while on China and, based on our research, we think it is working through the excesses of the past 10 years."
Because balance sheet recessions are different to country recessions, normal stimulus will not work in the same way, although the government has expressed that it will be supportive, and it seems to accept this could be the start of a three-year process to unwind previous excesses.
But Laud was not worried. She said: "We believe China is in a stabilising phase rather than deteriorating".
