China slowdown not all bad

CHINA’S economy is losing momentum but it’s not bad news for dairy exports.
Rabobank head of financial markets research Asia Pacific, Adrian Foster, expects China’s economy to grow 8% over the next two years after peaking at 12% in 2010. He says 11.7 million people are still moving annually to cities in China, opening new markets for dairy products.
“Just keep in mind 650 million Chinese people are yet to move,” he told the Dairy Business Conference in New Zealand last month. He spoke on ‘State of Play- a global perspective.’
Foster says the Chinese economy faces two big problems: over-supply of property and indebted local government.
“But we should keep these risks in perspective and think about the outlook,” he says. “My view is the combination of the global backdrop, the cyclical risks confronting China’s economy and the underlying factors supporting their trend growth momentum will resolve themselves with growth of circa 8% year-on-year in their economy this year and next.”
He also brushed aside concerns on the US and EU economies. “The headlines are overstating the negatives.”
Since Greece’s bailout, attention is turning to Italy, the EU’s third largest economy. But Foster believes there’s nothing to worry about.
“Recently the European Central Bank has provided effectively unlimited liquidity to the eurozone’s financial system and this has seen risks subside noticeably, and will over time support growth in the broader economy. I don’t think a financial crisis is brewing in the EU.”
On the US economy, Foster sees signs the economy is picking up. But until the labour market shows marked improvement, interest rates are likely to remain low for two years.
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