In a new Westpac note, the bank’s Head of International Economics, Elliot Clarke, argues that China’s biggest economic opportunity is also its biggest challenge: getting more of the country’s industrial success into the hands of ordinary consumers.<\/p>\n
Mr Clarke says China’s manufacturing sector remains exceptionally strong, with the country’s trade surplus back near record highs, high-tech investment continuing at pace and exports remaining resilient despite global uncertainty.<\/p>\n
But he argues those gains still haven’t translated into stronger household spending, with consumers held back by a continuing weak property market and sluggish income growth.<\/p>\n
… the primary cause of consumer hardship is instead the disconnect that has emerged between aggregate household income and the growth of Chinese industry.<\/p>\n
If consumers are to find their feet, the benefits of trade must pass through.<\/p>\n
We expect this to occur but as a multi-stage, likely multi-year, structural process beginning with pro-active stimulus later this year.\u00a0<\/p>\n
Initial steps are likely to focus on additional support for the housing sector and renewed subsidies for discretionary consumption.<\/p>\n
Westpac expects Beijing to roll out more stimulus later this year, likely focused on housing and consumer spending, but says rebuilding consumer confidence will be a gradual process rather than a quick fix.<\/p>\n
Mr Clarke argues that if policymakers can successfully revive household demand, China’s economy could continue growing above 4.5 per cent.<\/p>\n
If not, growth is likely to slow and become more fragile.<\/p>\n
If authorities take the initiative in coming months and reset the consumer story, GDP growth can be sustained at or above 4.5%, even as the impetus from trade fades.<\/p>\n
But, if the Government only guards against the downside, growth is likely to slow to 4.0% and become increasingly fragile.\u00a0<\/p>\n
He also says the shift has implications for Australia.<\/p>\n
The implications for Australia and our dollar are difficult to discern at this juncture.\u00a0<\/p>\n
China continues to expand not only its production chain but also its sourcing network across Asia, Africa and Latin America.<\/p>\n
As such, while commodity prices should remain supportive, Australia is unlikely to receive a material, lasting dividend from increased commodity export volumes.<\/p>\n","protected":false},"excerpt":{"rendered":"In a new Westpac note, the bank’s Head of International Economics, Elliot Clarke, argues that China’s biggest economic…\n","protected":false},"author":2,"featured_media":775306,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[2001,64,63,166,2009,99,2003,2005,160,2010,171,2007,2006,2008,2002,2004,1491],"class_list":["post-775305","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-asx","tag-au","tag-australia","tag-australian-dollar","tag-bitcoin","tag-business","tag-dollar","tag-dow-jones","tag-live-blog","tag-live-update","tag-markets","tag-nasdaq","tag-nyse","tag-sp","tag-share-market","tag-stocks","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/775305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=775305"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/775305\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/775306"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=775305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=775305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=775305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}