Businesses expect China slowdown to affect region

2012-04-09T12:00:00Z

Over the past few months analysts and the global financial media have been predicting a slowdown in China’s decades long runaway growth rates that have helped fuel economic growth in several countries around the world including the Pacific – particularly in Melanesia.<!--more-->

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Last week, Asian Development Bank (ADB) cut its projection of China’s 2012 gross domestic product (GDP) growth by nearly 1 percentage point. It warned that downside risks to the economy were likely to intensify in the short run given bleak global demand and the uncertain outlook for the country’s largest trading partners.

An update of ADB’s Asian Development Outlook 2012 lowers PRC’s 2012 forecast to 7.7% from the 8.5% projected in April. Its 2013 forecast is also ratcheted down to 8.1% from 8.7%. Subdued exports, weaker investment, softer consumption and a slump in industrial output dragged heavily on the economy in the first half of 2012, with GDP growth easing to 7.8% from 9.6% over the same period a year earlier, the ADB report says.

“The global slump in demand, especially from Europe, will remain a serious drag on growth in the near term,” said ADB’s Chief Economist Changyong Rhee. “The government has the means to cushion the economy from global turmoil, however. Its strong fiscal position, receding inflation and expansionary policy measures should ensure a soft economic landing, but it needs to expedite its effort to diversify the source of growth and strengthen structural reforms for inclusive growth.”

Ron Seddon, President of Port Moresby's Chamber of Commerce, told Radio Australia's Pacific Beat while PNG doesn’t do a lot of business with China, a decrease in demand there could affect global markets. “From a Chamber of Commerce point of view, we’re watching not only China but also to see where Europe is going to see whether its going to have an impact on us,” he said.

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