Introduction
Scepticism about China’s economic success has been an issue for years. But it’s intensified lately on the back of slowing growth, property problems, high debt and falling long term growth potential with talk that China is “teetering on the brink” and President Biden describing it as a “ticking time bomb”. After strong growth and a big run up in debt there is fear that it’s going down the same path as Japan which after a surge in asset prices and debt on the back of what was dubbed a miracle economy in the 1980s slipped into a long period of poor growth and deflation. As the world’s second largest economy what happens in China has significant ramifications globally and in Australia. This note looks at the main issues and what it means for Australia.
Slowing growth
After China’s Covid restrictions were finally eased late last year there was hope its economy would rebound. It did in the March quarter but since then its disappointed with GDP growth slowing to 0.8%qoq (from 2.2% in the March quarter) and July data showing a further slowing in growth in industrial production, retail sales (running at just 2.5%yoy) and investment.