China’s surging economic growth in not sustainable, warn panelists at an emerging markets seminar. Separately, a top economic analyst says China’s GDP and industrial production already are slowing.
It’s likely China will suffer a significant growth slowdown unless the authoritarian government institutes widespread market reforms, a trade official from Kasakhstan and a professor from Singapore agreed at a European Bank for Reconstruction and Development seminar in Kazakhstan.
That would affect emerging markets, demand for commodities and the entire global economy, said Karyrat Kelimbetoc, Kasakhstan’s trade and economic development minister and Bernard Yeung, dean of the National University of Singapore, according to Emerging Markets.
Both panelists warned other emerging nations against adopting China’s state-led growth model.
“We should support private sector development, otherwise we will fail,” said Kelimbetoc.
Yeung said China solved its financial crisis by asking banks to boost credit rapidly but is now beginning to see the consequences – higher inflation, a rising cost of living and soaring housing prices. “So China is heading towards a lot of problems and its growth model needs fixing,” he said.
In the meantime, Fidelity Investment’s director of economic analysis, Lisa Emsbo-Mattingly, said commodity prices tumbled recently in part because of growing shakiness in the Chinese economy.
“China is hands down the biggest source of marginal demand for every commodity,” she said in a question-and-answer session published by Fidelity Viewpoints. “If China’s demand for, let’s say, copper or iron ore or oil declines, that could create a very big price shift in the commodity. This recent decline was a bit of a shot across the bow of what could happen if China has a significant slowdown.”
She then pointed out that leading indicators in China are slowing significantly, including money supply growth, loan growth and the housing and property market. “There are warning signs that gross domestic product may in fact be slowing and industrial production is likely slowing,” she said. “This has all been the result of monetary and some fiscal tightening coming out of China in the last half year.”
Are you concerned that a slowdown in China may have a domino effect on other emerging nations and the global economy? Are you adjusting allocations as a result?