China slowdown won't impact all

Dubai: Fears of a significant slowdown in China are premature and the country's disappointing growth results are unlikely to have a major impact on the global economy, economists say.

The country's economy grew the slowest pace since 2009 in the third quarter of 2011, at just 9.1 per cent, compared to 9.5 per cent in the previous three quarters and less than the median estimate of 9.3 per cent in a Bloomberg News survey.

The news followed comments by world-renowned economist Nouriel Roubini yesterday that China would experience a ‘hard landing' in 2013 or 2014, warning that the country achieving a ‘soft landing' was ‘Mission Impossible'.

Asia's benchmark stock index sank after the results, the result of tighter credit and weaker demand from Europe, with the Nikkei and Hang Seng suffering heavy losses.

"You have to put it into perspective, we were looking at 9.3 per cent and we got 9.1 per cent," said Farouk Souza, chief economist for the Middle East at Citigroup.

"It hasn't jeopardised the China story, that of China being an engine of growth while economies in the rest of the world are suffering."

Gary Dugan, chief economists at Emirates NBD, agreed. "The problem is that markets cannot make their minds up. In the end, everybody has been saying that the Chinese economy should slow down, and now it is," he said.

"The data seems to support the idea that it is heading for a soft landing."

Exports were the equivalent of 27 per cent of gross domestic product in 2010. Growth in shipments to the European Union tumbled to 9.8 per cent in September from 22 per cent in the previous month, data released last week showed.

Investors' concerns about China's economy are focused on bad-debt risks for banks, funding for small businesses, and the ability of local governments to repay money borrowed for infrastructure projects. China Business News reported yesterday that rail projects have been halted due to cash shortages and the People's Daily reported that some road building has stalled for the same reason.

Meanwhile, the impact of the data on the ongoing wrangle between the US and China over appreciation of the yuan would also be minimal, economists felt.

"Most people agree that there is probably limited scope for appreciation at the moment," said Souza, pointing out that the yuan had already appreciated by 30 per cent in the last few years. Emirates NBD's Dugan added that the efforts by the US to push China into re-evaluating its currency, which is pegged to the US dollar, were counterproductive.

"I think they will continue on the path of appreciation but it will be in a measured way. Every time the American make a lot of noise about it, the Chinese stop, and when it calms down they start again," he said.

— With inputs from agencies