adminabout getting to grips with the structural problems at the heart of China’s economy. The result is likely to be a period of weaker growth. We expect GDP to grow by 7 percent in 2014 and by just 6,5 percent in 2015,” said Capital Economics in a report.
“Moreover, in addition to the weaker overall pace of growth, the drivers of China’s economy are likely to shift. Investment, which now accounts for nearly half of GDP, will cool. Meanwhile, household consumption is likely to become more important.”
While this kind of change is likely to take place over several years, it will have significant implications for the rest of the emerging world.
The biggest losers from China’s rebalancing are likely to be the major commodity-producing emerging markets, most of which lie in Latin America, the Middle East and parts of Africa, it added.
Local factors are expected to determine the extent to which commodity-producing EMs suffer as a result of weakness in China. Those economies that have saved their commodity windfall, for example, which run current account surpluses, look less vulnerable.
“It is worth noting that manufacturing-based EMs with strong ties to China, most of which are in Asia, are less vulnerable to Chinese rebalancing,” the report said. — Xinhua.
Online Reporter