Investors are waiting for the Chinese government to pump up its economy with a large stimulus package, but slowing growth is causing some consternation.
Add articles to your saved list and come back to them any time.When China dumped its COVID-zero policies in late 2022, financial markets were optimistic the world’s second-largest economy would rebound quickly as stringent restrictions were unwound.
China is Australia’s top trading partner with nearly 30 per cent of exports going to the world’s second largest economy.The country’s economic growth slowed to 0.8 per cent in the June quarter, and some argue we should expect long-term annual growth of about 4 per cent in China’s economy, down from rates of about 8 to 10 per cent in the boom era of earlier this century.
Disappointing economic activity data for July showed growth in consumer spending is slowing in China.Commonwealth Bank head of international economics Joseph Capurso says the weakness of the Chinese economy was partly a result of its policies during the pandemic.“We look at month on month changes in retail trade, investment and industrial production and all of those figures were near zero in July which is very unusual for the Chinese economy,” he says.
Wilson Asset Management’s Matthew Haupt said he’s bullish on China even though other investors might not agree.While he expects the Chinese government to correct this and ramp up its stimulus in the coming weeks, he concedes some have a more pessimistic view on China. Some analysts are comparing it to Japan, which has been stuck in an economic rut for decades in the face of an ageing population and low inflation – two issues also affecting China.
“The Chinese policymakers seem fairly restrained at this point in time. And I think it’s almost getting into a situation where they can’t wait much longer. They’ve really got to go pretty hard.” Dougal Maple-Brown, head of Australian value equities at Maple-Brown Abbott, is another investor who does not subscribe to the disaster scenarios for China, arguing it has “muddled through” economic hits before, and it would be pragmatic enough to do so again.Dougal Maple Brown thinks China will muddle through its economic issues as it has before.However, he says that if China’s economy did crash, it would hit large parts of Australia’s economy and sharemarket hard.
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