RBA and Australia Treasury Sees China Growing By 7.5%

Australian policy makers see little evidence of a slump in China’s economic growth, defying global pessimism that helped wipe $1.6 trillion from stocks this year.

The Reserve Bank of Australia and the nation’s Treasury forecast the world’s second-largest economy will expand 7.5 percent this year. The view is underpinned by a 21 percent expansion in Australia-China trade to a record A$141.8 billion ($127 billion) in 2013, led by shipments of iron ore, a key ingredient of the steel used to build the skyscrapers, subways and bridges transforming China’s cities.

Chinese Premier Li Keqiang has set a “bottom line” of 7 percent growth in gross domestic product as his leadership team seeks to engineer a transition to consumption from investment-led expansion. At the same time, Chinese authorities are stepping up efforts to rein in financial risks and squeeze speculative lending as concerns mount that a surge in borrowing over the last five years will tip the country into crisis.

“We’re really only seeing early signs, but consumption is a somewhat higher share of GDP than it was, and I would expect that trend to continue,” said John Edwards, an RBA board member who described himself as among the optimists. “China is effecting a bit of a transition and that’s also apparent in the shrinkage of its current account surpluses. A somewhat smaller contribution from net exports now than was true two to three years ago.”

Bloomberg

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