All eyes are now fixed on the eurozone. However, developments in the Chinese economy should not be ignored. The slowdown in the world’s second-largest economy could be more entrenched than expected. Here is what some analysts have told Reuters recently:
“I cannot see a bottom in [China’s] economic growth. The general slowdown trend may not change anytime soon,” Shi Xiaomin, vice president of the China Society of Economic Reform said.
“The [Chinese] economy is definitely on a downward slope,” said Gao Shanwen, chief economist at China Essence Securities in Beijing, who expects annual GDP growth to hover between 7-7.5 percent in the second- and third-quarter.
With all this gloom in sight, Kenneth Rogoff, a professor at Harvard University, believes Brazil is potentially more vulnerable to changes in China than it is to the eurozone crisis, particularly over the medium-to-long term. Timetric’s Mary Stokes shares Rogoff’s view and said the following:
“We don’t foresee a hard landing in China. We expect the government to use policy measures to smooth GDP growth and avert a sharp slowdown. However, if the Asian giant were to slow more than expected, Brazil would certainly be hard hit. China is Brazil’s single largest trade partner (though the EU as a block still buys a slightly larger share of exports) and an important source of foreign investment. Indirectly, Chinese demand has driven up the prices of global commodities, which has benefited many Brazilian exporters.”
Source: Reuters, Timetric