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Domestic and Global Causes Examined for China's Anticipated Slowdown
China's rate of real GDP growth is decelerating from the 10% range of the past decade down to about 5% to 8% for the rest of this decade. A slowdown in China's high-speed growth has long been anticipated and while this new range would be impressive for most countries, our perspective is that even global investors' expecting slower growth from China have not fully incorporated the extent of this deceleration into their expectations for related exposures, from commodities, to interest rates, to currencies, and so forth.
China is slowing now for some very obvious and also some considerably less obvious reasons. The more apparent suspects include a slowdown in exports to Europe and North America, and the natural and lagged repercussions from slowing the pace of Chinese domestic bank lending to contain inflation.
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