Just been reading a rather sombre article on Bloomberg about how the slump in Chinese house prices could translate into almost no global growth next year. Construction of Chinese homes, offices and factories fell at least 16.6% in October after rising 32.5% a year earlier, squeezing an economy already slowed by recessions in US, Japan and Europe which have cut demand for Chinese exports. Building is the biggest driver of China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million. The article quotes Jim Walker, a well-respected economist who works for Asianomics Ltd, who estimates China will grow between zero and 4% next year (compared to the World Bank’s forecast of 7.5%), with a 30% chance of contraction YIKES!!!!!. Mr Walker, voted best regional economist in an Asiamoney magazine brokers’ poll for 11 years through 2004, says “China is now at the heart of the global slowdown” adding “it means that global growth is probably going to be dragged close to zero next year.”
While China obviously has a lot of leeway to add to its’ fiscal stimulus package of 4 trillion yuan (indeed an announcement of another massive package may be imminent according to the Beijing-based Economic Observer), the article still gives one pause for thought.
