Powered by MOMENTUM MEDIA
subscribe to our newsletter

China slowdown a cause for concern

While all eyes have been on the unfolding situation in Greece, it is China that poses the greatest threat to the global economy, says one economist.

Standard Life Investments chief economist Jeremy Lawson said a hard landing in China would be a "large negative shock" for the global economy.

China represents 12 per cent of global GDP and 18 per cent of global manufacturing exports, Mr Lawson said – and commodity-reliant countries like Australia stand to be hit especially hard.

"China is seeing its slowest rate of economic growth since the financial crisis, along with rapidly declining commodity prices, falling export trade and a dramatic deterioration in nominal activity," he said.

"However, the epicentres of China’s economic problems are the industrial and property sectors.

Advertisement
Advertisement

"Growth of industrial output has declined from 14 per cent in 2011 to around six per cent in 2015, whilst industrial electricity consumption is in outright decline.

"China’s trade with the outside world is falling, and real estate investment – the primary engine of growth until last year – is going through a prolonged slump," Mr Lawson said.

Mr Lawson said the main components of activity preventing a deeper downturn are private spending on financial services, government-led spending on transport infrastructure, retail sales and services-led electricity consumption.

"This suggests that China has begun the rebalancing towards a more sustainable, consumption-led growth model – although it’s too early to claim success," he said.

Standard Life Investment's research shows that emerging markets are in a much better position to withstand external shocks than they were in 1990, Mr Lawson said.

PROMOTED CONTENT


"Overall, the government has stepped up the pace of structural reforms – liberalising the financial system, cracking down on corruption and loosening fiscal policy, albeit in a targeted way," he said.

"As a result we expect there to be modest success in boosting GDP although the longer-term glide path is towards slower growth."

China slowdown a cause for concern
mortgagebusiness

Latest News

Mortgage delinquency rates are tipped to increase moderately over the rest of the year, with Moody’s expecting economic aftershocks to lin...

A Nationals senator has faced criticism, after arguing Australians should be willing to cop higher mortgage costs to support lending to reso...

The major bank has increased its projected forecast of Australian house prices for 2021. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.