• Clifford Bennett, Chief Economist at ACY


• 17.01.2022 12:30 pm
#stocks

Across the board.

And it is permanent.

We have been saying for some time that the recent slow-down in China is not an aberration, but a resetting of the world's second largest economy into a sustained lower trajectory.

The entire global economy will experience a slowly spreading shock wave.

It has been a very volatile two years, but there is no doubting a settling return to what is an historic transition into the new normal for China. That is, growth rates in the 3% to 5% range, more akin to the west, for the rest of the decade and most likely permanently.

China and Asia in general have been the dominant drivers of global growth this century. Any slowing here, especially a permanent reset will see further afield ramifications. Particularly for Australia, where on top of China's natural slowing from its previous break-neck speed, there is also the issue of diplomatic discord.

China's long property boom is over and there have been lockdowns, and reduced production in preparation for the Olympics, but still the underlying trend is this permanent re-setting to more normal rates of growth.

China GDP Quarterly

At just 1.6%, this was the best for the year.

China Industrial Output Growth

Some may argue better than forecast, but still abysmal by previous standards.

China Fixed Asset Investment

I imagine you are getting the drift here, a terrible result.

China Retail Sales

Retail Sales in both the world's two largest economies are dropping fast. Making it difficult to see the untroubled global economy so many are championing.

The takeaway from today's data is that there is indeed hope of a post Olympics recovery. As efforts to reduce pollution and strictly contain Covid outbreaks recede, but overall there is also a softening trend which is indisputable.