STOCK MARKET WATCH, Thursday, December 15, 2011

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32. asia: China slowdown is the world's next nightmare

http://www.guardian.co.uk/business/economics-blog/2011/dec/15/china-slowdown-world-nightmare

China, like Britain, is looking more hangdog than bulldog. The manufacturing monster of the east is expected to suffer a rapid slowdown following the collapse in demand across the eurozone, according to several analysts. Without a strong and growing European market, they say, China's export driven industrial and commercial sector must see its current 9% growth rate lose momentum.

For a country that needs 5-6% growth just to keep pace with population growth, the eurozone recession could make for a hard landing in Beijing.

HSBC and Standard Chartered, two of the largest western banks operating in the region, have reaffirmed their confidence in the China growth story.

But Standard Chartered, while pencilling in 8.1% growth next year, is extremely worried by a growing housing bubble and the lack of a broad base of domestic consumption. At the moment even some of the poorest households save much of their income. Without higher taxes, giving rise to more sophisticated government services like health and social care, and protection from poverty in old age (better pensions would help) people feel compelled to save.