Growth in China to slow, but recession not likely

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Growth in the Chinese economy is headed for a slowdown, but fears of a recession in the economic powerhouse are not accurate, according to experts.

Australian businesses that have enjoyed strong trading with China will need to revise their business plans for slower growth, but the message is not one of 'doom and gloom', said Michael Reidy, executive manager, Trade and Working Capital Finance at Commonwealth Bank.

"China is Australia's largest trading partner, and while we are expecting more moderate growth in their economy, they will still require Australian exports," he said.

Global economist David Hale, who delivered a week-long series of presentations for the Commonwealth Bank, said growth in China had dropped from 12% in 2007 to 10% this year, with another 2% fall expected in 2009.

He said the current tumultuous times in the banking sector represent "truly one of the great bear markets of all times".

"Australia has had record prices for iron ore and coal, but there is likely to be a weakness next year in export demand - and if there is a decrease in exports, we will see it in corporate earnings and fiscal earnings," Hale said.

"For Australia, there will be moderation and a subdued environment, but not a hard landing. The previously experienced 3-4% growth will go down to around 2%."

Hale added that although there is a great deal at stake, "we are past the worst".

"The reduction of the spread in London's interbank market in recent times is a clear sign that globally, the financial system is improving," he said.



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