There are now fears that higher prices, particularly for food, will eventually lead to company failures and the tightening of money lending rules as the US and, to a lesser extent the UK, has already experienced. The consumer price index rose 6.9 per cent year-on-year and up from 6.5 per cent in October. There have also been concerns over the country’s trade surplus, which has contributed to fears of a significant economic slowdown.

Furthermore, the East Asian giant’s potential crisis may not be an isolated affair. Mexico has seen its national external debt fall 17 per cent in 12 years and has seen a significant increase in wages in the past decade. However, despite the country’s much more stable economy, it is still heavily reliant on the US for trade. With the US feeling the pinch in the wake of the sub-prime mortgage debacle, Mexico could join China on the danger list.

And emerging markets in Europe are not as far removed from the crisis as they might like to be. Experts have predicted that economic growth will fall one per cent in Poland and the Czech Republic, while expansion in Slovakia is more likely to fall by two per cent.

The effects of the credit crunch appear to be increasingly far reaching and established economies are continuing to suffer. According to the ZEW institute’s index, German investor confidence has hit a near 15-year low and this has been attributed to weak economic forecasts and the strength of the Euro. Meanwhile, figures from the Council of Mortgage Lenders show that UK mortgage prices are at a 15-year high.

It is unlikely that many countries will avoid the effects of the squeeze, with several of the now burgeoning young economies set to become its next casualties.

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