{"id":356015,"date":"2010-02-23T23:41:46","date_gmt":"2010-02-24T04:41:46","guid":{"rendered":"http:\/\/www.dailyreckoning.com.au\/?p=8269"},"modified":"2010-02-23T23:41:46","modified_gmt":"2010-02-24T04:41:46","slug":"economy-of-china-to-decelerate","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/356015","title":{"rendered":"Economy of China to Decelerate?"},"content":{"rendered":"

What about China, though? RBA governor Rick Battelino told a group of people<\/a> in Sydney last night that despite the interruption of the GFC, “the underlying dynamics of the resource boom are starting to reappear. Those dynamics, presumably, are China’s growth and the investment required in the domestic resource economy to increase production of coal, iron ore and everything else China buys from Australia. <\/p>\n

Battelino says, “It’s hard to put a finger on exactly how much investment is going to take place, but I don’t think it’s unreasonable to expect mining investments to rise to 6 per cent of GDP over the next few years. That would be about twice as high as it got to in the previous boom. It’s a very big boom.”<\/p>\n

He reckons the boom could last into the 2020s. “Past booms do not seem to have lasted more than about 15 years before resource depletion or international or domestic developments acted to slow economic activity and bring the boom to an end.” But fear not!<\/p>\n

“On this occasion, the growth potential of countries such as China and India suggests that the expansion and resource demand could continue for an extended period. Whether this eventuates, however, will depend on, at least to some extent, the economic management skills of the authorities in these countries, not to mention our own.”<\/p>\n

But there are plenty of sceptics on the China story already. Our old friend Marc Faber told Bloomberg that, “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity. I think the Chinese economy will decelerate very substantially in 2010 and could even crash.”<\/p>\n

And what would that mean for Australia and Aussie stocks? Quite a lot, of course. Faber says that, “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities.” <\/p>\n

That couldn’t be any clearer.<\/p>\n

But maybe we are overly pessimistic. We’re hopping on a plane tomorrow and headed to the other side of the world to discuss these and other matters with some old friends who’ve been in the investment game for a long time. If they are more sanguine about things, then we’ll be really worried. <\/p>\n

Dan Denning
\nfor The Daily Reckoning Australia<\/p>\n

Similar Posts:<\/p>\n