China's slowing growth could spell bad news
Mon, 16 Jul 2012 9:19a.m.
By Jono Hutchison
China's economy grew by 7.6 percent in the second quarter of this year.
For Europe, the United States and New Zealand, that sort of growth is enviable - but for China it was another sign that the economy could be slowing down.
So what does this mean for us?
In Hamilton, a small company called Quantec has developed a milk extract to fix bad breath and boost immunity, and it's being launched in China this week.
“We suspect the starting size of the market is about $2 million worth of product for us, which represents a pretty good opportunity for a small to medium-sized company like ours,” says Quantec managing director Rod Claycomb.
The communist state - the world's most populous country - has become an economic giant over the past 20 years.
New Zealand has been keen to make the most of that – for good reason.
“For me, you just look back and you think what would have happened to the New Zealand economy, in the context of the global economy since 2008, if we hadn't had the strong links with China,” says PricewaterhouseCoopers’ Colum Rice.
But there are signs that China is weakening. On Friday the government there said the economy had grown by 7.6 percent in the second quarter - its slowest rate in over three years.
Those figures are mistrusted by some, who believe the reality could be worse. One economist says diesel sales were down 10 percent last month.
“We know diesel is mainly used by transportation trucks and other heavy duty machineries. So if there is such a relatively dramatic decline of diesel fuel in China, that tells you something,” says economist Chen Zhiwu.
China's manufacturers have been hit by lower demand from Europe and the United States.
“My clients say next year could be even worse. I don't think it can get worse,” says factory boss Leo Ho.
But Mr Rice says there are other figures that show China is still strong.
“Electricity consumption's always a good one to look at because that's less variable -- it either gets consumed or it doesn't. And it's still growing, which means the underlying economy's still growing, just at a slower rate than it has been before,” he says.
Dr. Xin Chen, a research fellow at the University of Auckland, says there is still demand for New Zealand goods.
“New Zealand exports are primary products: agricultural, dairy and other primary materials. And these are what China needs,” he says.
Back in Hamilton, Quantec's managing director says he still sees plenty of demand in China.
“I pay particular attention to the growth in, say, dairy consumption in China. And I think they're still growing in the double-digit percent per annum. And that bodes really well for NZ dairy products,” says Mr Claycomb.
He's already working on his next export projects.
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