Because of its sheer size, any substantial movement in the Chinese economy has far reaching implications for all of us.

According to the International Monetary Fund (IMF), China recently surpassed the U.S. as the largest economy in the world, with $17.6 trillion in annual gross domestic product (there is some controversy associated with those numbers, but China is very big by any standard).

The Chinese population is estimated to be nearly 1.4 billion people (compared to just over 321 million in the U.S.). When such a large player in the global economy falters, ripple effects are inevitable and pervasive.

China’s world influence has grown substantially over the past few decades, as the country maintained double-digit economic growth due to increasing capital investments, worker productivity, and opening trade opportunities in the global marketplace. Although statistics are sparse and have been called into question by some observers, the reported real gross domestic product (RGP) growth rate peaked in 2007 at 14.2 percent before decelerating to around ten percent. In 2012, growth further decreased to the seven to eight percent range, with subsequent signs of further slowing. This pace is not too shabby by world standards and well above the U.S., but a cause for concern nonetheless.

As China’s economic growth slowed last year, Chinese policymakers allowed brokers to lend billions of dollars to small investors, contributing to a bull market which pushed the Shanghai Composite Index up rapidly. Fearing investors were taking on too much risk, authorities took action to cool the market: the People’s Bank of China pulled in approximately 300 billion yuan in short-term funds from the economy, and almost immediately the Shanghai Index began to plummet. This pattern has been dramatic. From 3234 on December 31, 2014, the Shanghai rose to 5166 on June 12, 2015, then fell sharply to 3686 on July 3 and was back up slightly to 4026 on July 22. Government intervention in the market likely kept things from getting even worse.

Chinese policymakers are attempting to slow the market enough to correct the bubble, without triggering a prolonged downturn. The bull market this year has been one of the few strengths of China’s decelerating economy, as economic expansion slowed and housing prices became stagnant after years of gains. Industrial production and real estate investment have also moderated in recent years. Infrastructure spending, a significant driver of Chinese growth, has also waned as local governments struggle with debt and other challenges.

The Conference Board, a non-profit economic and business research association, speculates that this deceleration in the Chinese economy will continue over the next decade, but that business activity can still tap into unrealized potential. The organization recently published a report, The Long Soft Fall in Chinese Growth, in which it presents evidence that this economic slowdown will bring opportunities for mergers and acquisitions for foreign companies, less intense competiveness among Chinese firms due to their reduced access to capital, and greater receptiveness on the part of the Chinese government to external ventures and investment.

Chinese leaders continue to express confidence that the Chinese economy will maintain expansion at seven percent to eight percent annually, and several economic research organizations (such as World Bank and the Organization of Economic Co-operation and Development (OECD)), support those expectations. Additionally, the OECD suggests that as real estate and business investment decline, infrastructure investment will once again increase, thereby offsetting some of the projected decline. It is also expected that urbanization will continue to thrive and be a source of potential growth. The OECD also reports an expansion in Chinese service industries and believes that this phenomenon will create jobs and help keep unemployment down.

As a major trading partner for both the US and Texas, the status of the Chinese economy clearly affects domestic business activity. The U.S. imported products from China with a value of almost $466.7 billion last year according to the International Trade Administration of the US Department of Commerce. The largest category by far was computer and electronic products, with $168.0 billion, followed by electrical equipment, appliances, and components with $38.9 billion. Exports to China in 2014 totaled $124.0 billion, led by transportation equipment, agricultural products, and computer and electronic products.

China is also an important market for Texas exports. According to the U.S. Census Bureau, China is the fourth largest market for Texas products at about $11.0 billion in 2014. Top product categories are chemicals ($3.1 billion), non-electrical machinery ($1.5 billion), and agricultural products ($1.4 billion), and computer and electronic products ($1.3 billion). Texas’ exports to China remained in the $10-11 billion range from 2010 to 2014, but stabilization and improvement in the Chinese economy and the likelihood of more liberal trade policies should stimulate greater opportunities over time.

Another way Chinese economic performance affects Texas business is through oil prices. Over the last few years, the deceleration of China’s growth and resulting lower demand for oil was a notable contributor (among many) to the global decline in petroleum costs. China is one of the largest importers of oil in the world, surpassing even the US. As China’s economy stabilizes and demand for oil begins to recover, there will be some upward pressure on crude oil prices.

While the Chinese economy is growing at a slower pace than in years past, current data suggests that it is stabilizing with growth in the seven percent range. While the stock market has recently dropped sharply, it remains up for the year (as I write this, anyway), and volatility is usually much higher than it is in the U.S. There are also some issues in the Chinese banking system which must be addressed at some point. All in all, I would be surprised by a return to the dramatic pace of a few years back, but would be even more surprised by a major collapse.