China, like Britain, is looking more hangdog than bulldog. The manufacturing monster of the east is expected to suffer a rapid slowdown following the collapse in demand across the eurozone, according to several analysts. Without a strong and growing European market, they say, China's export driven industrial and commercial sector must see its current 9% growth rate lose momentum.
For a country that needs 5-6% growth just to keep pace with population growth, the eurozone recession could make for a hard landing in Beijing.
HSBC and Standard Chartered, two of the largest western banks operating in the region, have reaffirmed their confidence in the China growth story.
But Standard Chartered, while pencilling in 8.1% growth next year, is extremely worried by a growing housing bubble and the lack of a broad base of domestic consumption. At the moment even some of the poorest households save much of their income. Without higher taxes, giving rise to more sophisticated government services like health and social care, and protection from poverty in old age (better pensions would help) people feel compelled to save.
Standard Chartered's chief economist Gerard Lyons is of the firm belief that the head-in-the-sand approach of the Chinese leadership, many of whom are up for election, could, "given the complex and interconnected nature of the current challenges", mean the strategy stops working.
Michael Derks, chief strategist at currency trader FxPro, takes an even gloomier view. As Michael writes in English, readers can read his own words.
He says: "Europe may be terrifying, but equally frightening are the signs that China's booming economy is rapidly unravelling.
"Recent surveys of manufacturing suggest that growth in the sector is actually contracting, money supply growth last month was the slowest for more than a decade and export growth has slowed markedly, especially to Europe. Property prices are declining and quite quickly in some major cities. For instance, one survey of new home prices in Beijing claimed that they fell by more than one-third in November alone.
"As is so often the case, excess leverage is amplifying China's slide. According to the IMF, the value of loans as a percentage of GDP has doubled in the country since 2006. Justifiably, there is growing concern that bad debts at financial institutions could grow quite swiftly next year. China will soon discover just how difficult it is to manage the combination of widespread deleveraging and a large debt mountain."
He points out that offshore investors have been fleeing China over recent months to safer havens – "witness the 30% decline in the Shanghai Composite over the past six months, the recent pressure on the yuan and the decline in China's massive foreign exchange reserves in recent months."
So next year all the worries could switch from what's happening over the channel to what's happening in Asia.
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