Asia to feel the pain of China slowdown, hard landing unlikely: S and P
Asia to feel the pain of China slowdown, hard landing unlikely: S and P
Martin Abbugao, Agence France-Presse, Jeju, S.Korea
Asia will feel the pain of a slowdown in the giant Chinese
economy, international credit ratings agency Standard and Poor's
said Friday, but stressed that a hard-landing that would wreak
havoc on the region is unlikely.
The pace of a state-engineered slowdown to cool China's
overheating economy is expected to cast a shadow over the Asian
Development Bank (ADB) annual meeting that starts here on
Saturday although it is not on the official agenda, bank sources
said.
China's strong appetite for raw materials and other goods have
increasingly made the country a major export market for many of
its Asian neighbours.
However, the analysts from Standard and Poor's told a news
briefing on the sidelines of the ADB conference that a drastic
slowdown in the Chinese economy was unlikely although it cannot
be totally ruled out.
"There will be pain with any slowdown in China," said Standard
and Poor's credit analyst Chew Ping.
"The pain will be spread in certain sectors particularly
companies, even banks (within China) but we do not think that
this will translate into a system-wide meltdown or crash.
"Also, the pain will be shared with external partners as well.
China's imports from the Asian countries have increased
tremendously so any slowdown will be felt not just across Asia
but also globally."
The World Bank, in a study released this year, said China and
its special administrative region of Hong Kong accounted for 25
percent of South Korea's total exports, about 35 percent of
Taiwan's and 12-13 percent of Malaysia's and Thailand's.
Standard and Poor's said the likely scenario in China is for a
"soft-landing", which means the economic expansion will be slowed
to between seven and eight percent this year from over nine
percent in 2003.
Any growth below that range would be considered drastic.
Chew and his colleague at Standard and Poor's, John Bailey,
said there is overheating in the Chinese economy but only in
certain sectors such as cement, steel, autos, property, aluminum
and telecommunications equipment.
They pointed out that the overheating was not system-wide as
there is also under-investment in other sectors such as power,
water and transportation.
Chew said that unlike in the 1990s, Chinese authorities had
taken action earlier to cool the economy and their measures now
are gradual and targeted at the affected sectors.
"In addition, the economy is in the hands of officials who are
more aware of the challenges facing them and of the consequences
of their actions than were their predecessors.
"The challenges currently facing China, while still
formidable, are more manageable than those of the 1990s," he
said.
Bailey added: "It is inevitable that growth will lose some
momentum but no collapse is expected."
Takahira Ogawa, another Standard and Poor's analyst, said the
economic recovery in the United States and Japan, and signs of a
rebound in Europe would make up for some of Asia's loses in case
of a slowdown in China.
Chinese authorities have taken steps to curb bank lending as
part of a string of measures to calm soaring investment by local
governments, which is contributing to the overheating and over-
investment in some sectors.
China's cabinet, the State Council, ordered a stop in
approvals for new steel, aluminum and cement projects this year
and called for a review of ongoing investment projects, including
commercial offices, golf courses and shopping malls.
It also wants an end to the process of converting farmland for
use in infrastructure projects.