Effects of China Slowdown Would Be Felt World-Wide
If China sneezes, should global financial markets reach for the tissues?
It wasn't long ago that China remained far removed from the daily workings of Wall Street, with a pegged currency and tight restrictions on capital flows. Now, what goes on in China has the potential to shake markets virtually anywhere.
Most of Beijing's restrictions remain in place, but last week China rattled global markets after it moved to restrain bank lending on the same day that Premier Wen Jiabao said his government needs to take "very forceful measures" to ease inflationary pressures.
The news itself was expected; authorities have been trying to release some steam from a fast-running Chinese economy since late last year. Nevertheless, as stock markets fell across Asia and in major centers like New York and London, and as global commodity prices dropped, analysts and traders blamed fears of a slowing Chinese economy.
"The thought that a major engine of global growth may be tapping the brakes causes problems for the more cyclical parts of the stock market," said Jack Caffrey, equity strategist at J.P. Morgan Private Bank in New York, at the time.
It's no surprise that commodity markets or Asian markets would shudder at the thought of a Chinese slowdown. China is importing massive amounts of key commodities to feed the growth of its manufacturing and to improve its infrastructure. In 2003, China accounted for 7% of global oil consumption, and was a big consumer of other important goods: 27% of the steel used in the world last year, 31% of the coal and 40% of the cement.
Indeed, Asia's hopes for growth are increasingly pinned on the idea of China's 1.3 billion people becoming full-fledged consumers. Companies across the region have set up assembly plants in China and an increasing share of Asia's trade now either passes through China or ends up there.
But should investors in New York or London react so strongly to policy moves in a country that accounts for less than 4% of global gross domestic product?
"Certainly they should," says Ajay Kapur, chief Asia strategist for Citigroup's Smith Barney in Hong Kong. Mr. Kapur says that China may be a small factor in overall global economic production, but it's a major factor in global growth. He estimates that during the last five years, China has accounted for 25% of the expansion of global capital expenditure. "China is punching well above its weight in" capital expenditure, says Mr. Kapur.
That means that for any large company involved in construction, raw materials, infrastructure development or industrial machinery, "if 25% of growth is coming from China, they've got to be paying attention."
A Chinese slowdown also would have global repercussions because it would hit so hard in Asia and on global commodity prices, effects that would ripple out to markets world-wide. "The coming slowdown in the Chinese economy should be viewed as a global event," Morgan Stanley chief economist Stephen Roach wrote in a report to clients Monday. "There is good reason to believe that the impacts of a sharp slowdown in the Chinese investment cycle could spread well beyond Asia," he said.
If global investors are worried that a China slowdown could hurt them, it's also worth considering that China's strengthened links to the rest of the world may actually make it tougher for Chinese officials to achieve that slowdown. So far, measures have mainly consisted of directives on lending policy for banks and repeated warnings in the official media that investments in some sectors have been getting out of hand.
"I don't think China has come to grips with the fact that it is now affected by these global waves of business activity because it is much more open today than it was even four years ago," says Gail Fosler, chief economist of the Conference Board, a U.S. business think tank.
The Conference Board predicts global growth will speed up this year to 5% or more from 3.5% in 2003.
"It is incomprehensible that the Chinese economy will in and of itself simply move in the opposite direction" to a global economy in a growth phase, she says.
Indeed, the Conference Board expects growth this year in China to be between 10% and 12%, despite the government's attempts to slow the economy to 7% growth this year. China's economy expanded at an annual pace of more than 9% in 2003, and again in the first quarter.
Nor do Chinese authorities want to kill off growth altogether. "China still wants to grow at a fast clip," notes Greg Gibbs, senior currency strategist for Royal Bank of Canada Capital Markets in Sydney.
The worry among some analysts is that China's attempts to slow its growth will tip the country into a sharp downturn -- a "hard landing" in the language of economists.
Analysts who warn that China's boom is threatening to turn into a bust point out that China has entered the global economy without properly functioning financial markets. Andy Xie, economist at Morgan Stanley in Hong Kong, says China's financial system is essentially run by the Communist Party leadership, that statistics on its economy are unreliable and that its central bank isn't independent.
Fixing those problems might help cure China of its cycles of boom and bust. It also would smooth Beijing's integration with the global economy, and would go a long way toward letting those who increasingly rely on China for growth to sleep better at night.
中国经济减速波及全球
如果中国打喷嚏，是不是全球的金融市场都要感冒？
中国实行钉住汇率制，并严格限制资本流动，这在不久之前与华尔街的日常交易还毫不相干。而现在，中国发生的情况可能会造成全球所有市场的动荡。
中国政府的多数限制措施依然没有改变，但上周中国遏制银行贷款的举措却给全球市场造成了冲击，当天中国总理温家宝还表示，中国政府需要采取强有力的措施缓解通货膨胀压力。
这则消息本身并未完全出乎人们意料；自去年底以来，有关部门一直在想方设法给快速增长的中国经济降温。但随著亚洲股市及纽约和伦敦等主要股市的下跌，以及全球商品价格的走低，分析师及交易员开始纷纷将之归因于对中国经济减速的恐惧。 J.P. Morgan Private Bank驻纽约股票策略师杰克?卡弗里(Jack Caffrey)当时称，全球增长的主要火车头可能刹车的观点给股市上与经济周期关系密切的公司带来压力。
商品市场或亚洲市场因中国经济减速而受到冲击不足为奇。中国进口了数量巨大的主要商品，以满足其制造业增长和改善基础设施的需要。2003年，中国的石油消费量占世界的7%，钢材消费量占27%，煤炭和水泥消费量分别占31%和40%。
的确，亚洲增长的希望越来越维系于中国13亿人口成为成熟消费者的预期上。亚洲许多公司都在中国设立组装工厂，该地区越来越多的贸易都是途经中国或是以中国为终点。
但纽约或伦敦投资者值得对中国这个不足全球GDP总值4%的国家的政策变动做出如此强烈的反应吗？
花旗集团(Citigroup)旗下美邦(Smith Barney)驻香港首席亚洲策略师阿贾伊?卡普尔(Ajay Kapur)说，这点毫无疑问。卡普尔说，中国可能只占全球总产值的很小一部分，但却是全球经济增长的主要力量。他估计在过去5年中，中国占全球资本支出增长的25%。卡普尔说，中国在全球资本支出中的作用越来越重要。
这意味著对建筑、原材料、基础设施开发及工业机械领域的任何大公司而言，如果25%的增长是来自中国，他们都不得不加以注意。
中国经济减速也将引起全球的连锁反应，因为它将严重打击亚洲市场以及全球商品价格，并且这种影响将扩散至全球市场中。摩根士丹利(Morgan Stanley)首席经济师斯蒂芬?罗奇(Stephen Roach)在周一写给客户的报告中称，中国经济即将减速仍被视为是全球性的事件。他说，有充分的理由相信，中国投资增长明显放缓带来的影响也将蔓延到亚洲以外地区。
如果全球投资者担心中国经济减速可能损害其利益，那么也应该考虑到，中国与世界其他地区联系的日益密切可能使中国政府难以实现给经济降温的初衷。迄今为止，中国所采取的措施主要包括指导银行贷款政策，以及在官方媒体屡屡表示部分领域的投资失控。
世界大企业联合会(Conference Board)首席经济学家盖尔?福斯勒(Gail Fosler)说，她认为中国并未了解以下事实，即中国经济现在受到全球商业活动的影响，因为目前的中国经济比4年前都更为开放。
世界大企业联合会预计，今年的全球经济增长率将从2003年的3.5%增加到5%或更高。
她说，在全球经济持续增长时，中国经济却置身事外甚至向相反的方向运行，这是不能理解的。
的确，世界大企业联合会预计，尽管中国政府试图使今年的经济增长率减缓到7%，但中国经济仍将增长10%至12%。中国经济去年的增长率超过9%，今年第一季度也是如此。
Royal Bank of Canada Capital Markets驻悉尼高级外汇策略师格雷格?吉布斯(Greg Gibbs)说，中国当局也不希望经济完全停止增长，它仍希望经济保持强劲。
部分经济学家担心，中国减缓经济增速可能导致经济硬著陆。
认为中国经济可能盛极而衰的分析师指出，中国已进入到全球经济当中，但金融市场并未发挥适当的功能。摩根士丹利驻香港经济师谢国忠(Andy Xie)说，中国的金融系统基本是在共产党的领导下运行，经济统计数据的可靠性值得推敲，央行也难以保持独立。
解决这些问题可能有助于中国顺利渡过经济的兴衰周期。这还有助于中国平稳地融入到全球经济中，并使那些增长越来越依靠中国经济的公司放宽心。
