Thursday, 28 March 2013

The China connection...

Australian financiers must be worried.... what better way to stifle concerns that you are too exposed to the pitfalls of your biggest trading partner and engine of growth (or as Niall Fergusson would put it, your new colonial master), than to have a serious heavyweight economist interview to dispel any concerns about all those annoying images of ghost cities which have been making the press recently.

Over to Professor Garnaut (whose son John Garnaut is a top China analyst) batting away some pointed questions from Tony Jones and not an upbeat conclusion:

ROSS GARNAUT: Yeah. I think we've got some big adjustments coming and that's going to be quite difficult for us. China's growth being a couple of percentage points below the average of the few decades past does take the edge of things, but more important for Australia is the big structural change occurring in China. That's all written into the 12th five-year plan from 2011 to 2015, a deliberate policy of trying to increase the consumption share of total expenditure....

In fact the interview is excellent and covers a number of key aspects - link here.

Of course this would not be a worry for Australian banks in particular if they did not have a large exposure to China and rest of Asia (or was it just China?)...

....Australia’s banks have more-than quadrupled their exposure to Asia in the past five years as they seek to cash in on the resource-rich nation’s growing trade ties with the region, the country’s central bank said.....That hasn’t substantially increased their risk profile, the central bank said, although credit risk remains an “an area to watch.”... (here).

Oh dear...


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