China’s slowdown threatens Australia’s economy

Trade with China accounts for nearly a third of Australia’s total world trade, according to the Department of Foreign Affairs and Trade. In 2020, it was valued at $245 billion. Despite the strong headlines, the trade relationship has been bumpy as unofficial trade bans on Australian goods including coal, wine, beef and barley were imposed as diplomatic relations soured during the pandemic.

But there are signs some of those trade embargoes are now being lifted following Foreign Secretary Penny Wong’s trip to Beijing to mark the 50th anniversary of Sino-Australian diplomatic ties. Last week, three state-owned utilities and a major steelmaker were allowed to resume some coal imports from Australia.

The Chinese government agency’s official figures have been met with skepticism by economists, who believe the real numbers – China’s second-weakest growth rate since the end of the Cultural Revolution in 1976 – are much worse than publicly announced.

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“China’s Bureau of Statistics claims GDP is flat [in the fourth quarter of 2022]said Julian Evans Pritchard, senior China economist at Capital Economics.

“That’s not plausible, even considering December’s data showing surprising economic resilience amid the reopening wave of infections.”

China’s near-term threat is compounded by a long-term demographic cliff that is seriously affecting the Chinese economy.

The National Bureau of Statistics said Tuesday that China’s population has shrunk for the first time since 1961. That mark is expected to be the first of many declines in China’s population of 1.4 billion, which is expected to fall to 800 million by 2100.

Louise Loo, a senior economist at Oxford Economics, said there was some good news in the data.

“There are now signs of stabilization as the policy support provided towards the end of 2022 is reflected in the relative resilience of infrastructure investment and credit growth,” she said.

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Australia’s economy grew almost twice as fast as China’s in 2022. A surge in household spending on restaurants, clothing and new cars helped propel economic growth for the year to 5.9 percent through September, although rate hikes put pressure on mortgage repayments.

Household spending remained strong during the holiday season, rising 11.4 per cent for the year to November, according to the Australian Bureau of Statistics, but that growth is expected to slow as interest rate hikes and high inflation continue. The Treasury Department forecasts that economic growth will slow to 3.25 percent for fiscal 2022-23 and fall to just 1.5 percent in 2023-24.

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https://www.smh.com.au/politics/federal/china-s-covid-plagued-slowdown-threatens-australia-s-economic-recovery-20230117-p5cd9n.html?ref=rss&utm_medium=rss&utm_source=rss_politics_federal China’s slowdown threatens Australia’s economy

Callan Tansill

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