China’s economy is growing strongly, but SMH columnist Stephen Bartholomeusz argues the way it is growing is making it vulnerable. GDP rose 4.5 per cent in September and 4.6 per cent over the first nine months, beating forecasts.
Behind that, domestic demand is weak. Retail sales rose just 1.1 per cent in September, and the property market is still down about 40 per cent from its peak, with property investment falling another 20.6 per cent this year. That leaves exports to soak up factory over-capacity.
In September exports grew 36 per cent, the fastest in more than 15 years, producing a trade surplus of US$938 billion. China is on track to beat last year’s record US$1.2 trillion surplus.
Pushback is building. Imports into the EU from China are running 36 per cent higher this year, and the EU agreed this month to cap Chinese hybrid car imports at roughly half current levels. France and Germany are also pushing for new powers to shut off market access if a country is seen to damage the EU economy.
The column adds that high-tech exports, especially chips tied to the AI boom, now make up roughly a third of export growth, so an AI slowdown would hit China as well as the US.
What it means for your money
China is a major buyer of Australian resources and a big force in global prices, so trade tension and a slowdown there can flow into the ASX, the dollar and super balances. It’s another reason to stay diversified rather than leaning on a single sector or market.
Source: SMH Business