Steeper slowdown in China may put world on recession path

China's economy is believed to be following a more bearish trend than expected. China accumulated too much capital but it is unable to establish a balance between investment spending and consumption. 

If the rebalancing act must take place with a cyclical slowdown in demand or a trend shock to productivity, the world growth outlook as well as the policy reactions will be completely different. There is a serious question before market is whether productivity growth of China will be remain unaffected or has fallen permanently. Barclays believes, productivity of the economy has fallen permanently.

"We see three main risks to our basic macro framework for 2016. The most obvious one is that a steeper growth slowdown in China may put the world on a recession path, renewing solvency fears in the euro area", says Barclays.