According to analysts at ANZ, what happens in China is increasingly important for EMs and global growth prospects.
Key Quotes
“Chinese GDP accounts for roughly 40% of EM GDP, more than double its size at the start of the millennium.”
“Chinese fixed-asset investment (housing and infrastructure) has significant implications for the global commodity cycle, while Chinese consumer demand is becoming an important source of demand for Asia-wide goods and services, notably luxury items and tourism.”
“China’s momentum is clearly slowing, both cyclically and structurally. Reform is happening but it will take time to boost growth, while the cyclical slowing is necessary to counter rising financial instability risks.”
“Although Chinese officials have introduced stimulatory measures, the stimulus may not be what some hope for, and it is likely to take time to impact.’
“We point out that the stimulus measures are supporting the reform agenda not unproductive investments that could exacerbate existing macro and financial imbalances.”
“On the monetary side, some of the recent ‘easing’ measures (eg required reserve ratio cuts) are about fine-tuning rather than an easing in the traditional sense.”
“In another potentially worrying development for EM countries the RMB has been weakening, which seems partly to have been brought about by the trade spat with the Trump administration.”
“EM countries that compete with China will lose competitiveness and countries that import to China may face weaker demand.”
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