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CHINA 2012 MACRO OVERVIEW 2013 OVERVIEW

MACRO OVERVIEW CHINA 2013

Outlook remains bright, despite gathering clouds
A managed slowdown in China’s dizzying economic growth of recent years – and a rebalancing of the country’s economic model – could create as many opportunities as risks for investors. Although there are many areas of concern, not least in the potential for a full-blown credit crisis, China’s economic transformation and the liberalisation of the country’s financial services industry will open up more diversified opportunities for domestic and overseas investors

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o put it bluntly,” commented a recent report on China published by Société Générale Cross Asset Research, “the situation could become as bad as one dares to imagine.” That somewhat apocalyptic-sounding prognosis refers to a scenario in which Chinese GDP growth slows to below 6%, which is SG’s definition of hard landing. This, says SG, would be driven either by trade shocks triggering a sharp fall in Chinese exports, or by insufficient public investment and by credit deleveraging overshooting – or, in a worst-case scenario, by a cocktail of all three. Quite how catastrophic a slowdown in growth to below 6% would be, however, depends on where you sit. It is bad news if you are a real estate broker in the Western Australian town of Port Hedland, which has flourished on the back of the Projected slowdown China-driven commodities boom – or if you have just in Chinese GDP poured your life savings into a Zambian copper mine. growth rate It may also be grim news, in the short term at least, if you Source: Société Générale are long many of the world’s developed or emerging equity

KEY FACTS China in 2012
GDP (USD billion) GDP per head (USD) Population (million) International reserves (USD billion) Net external debt (% GDP) Central government total debt (% GDP) CG foreign-currency debt (USD billion) CG domestically issued debt (CNY billion) 8,107.3 6,000 1,353.9 3,387.4 -44.3 16 34.4 8,035.9

6%

Source: FitchRatings
6 Special Report September 2013
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