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Slower growth for China’s $10tn economy does not only pose a problem for policy makers in Beijing — it is reverberating around the world.
● Global real estate
Chinese stimulus measures including two interest rate cuts since November have arrested the steady appreciation of the renminbi and raised fears of capital flight, which would further exacerbate the distortions already wreaked by Chinese property investors in markets around the world as they seek havens for their wealth.
Real estate brokers estimate that Chinese buyers are now the biggest force in the US, UK and Australian property markets. Singapore has reacted by imposing punitive real estate taxes in an effort to keep its own residents from being priced out of the property market. But slower economic growth in China will only make it harder to rein in soaring global property prices.
● Luxury sales
March retail sales grew 10.2 per cent year-on-year, a nine-year low, suggesting more trouble lies ahead for companies such as Prada and LVMH. Both have already been hit by President Xi Jinping’s austerity and anti-corruption campaigns.
Last week Prada reported its first drop in annual net profit since listing in Hong Kong in 2011. LVMH has also cited weaker demand for brands such as Louis Vuitton and Christian Dior in China.
● Iron ore industry
A number of Australian mining companies are fighting for survival as commodity prices plunge, in part because of slower economic growth in China.
As iron ore fell below $50 a tonne last week, Atlas Iron mothballed its operations in the Pilbara region. Fortescue Metals Group has changed its work rosters as it struggles to squeeze more productivity out of staff, slash costs and service its $7.5bn net debt.
● Deflation fears
First-quarter consumer price inflation came in at just 1.2 per cent — far below the Chinese government’s 3 per cent target. Officials argue that this reflects the falling cost of imported commodities and bumper harvests at home.
But it also suggests the rest of the world may be disappointed if it is hoping for Chinese demand to spur other economies now flirting with deflation. The value of China’s first-quarter imports fell 17.3 per cent year-on-year.
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