Australian Treasury: China train is back on track

Updated: 2012-12-20 17:46


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SYDNEY - Australia's Federal Treasury has hailed China's economic rebound after a brief slowdown, echoing the confidence expressed by leading economists that the so-called "China train" is back on track.

In a publication to honor the 40th anniversary of Australia- China diplomatic relations, the Federal Treasury noted that China's economic growth retains a solid domestic economic basis and that the slowdown that has been the subject of so much economic wringing of hands was due almost entirely to global fluctuations.

"The consensus view is that China still has significant potential to grow, particularly through the ongoing process of 'catch-up' as China's overall urbanization and productivity levels still lag significantly behind those of advanced economies," the Federal Treasury said.

The business community here also expressed confidence that China's still sizeable economic growth for the third quarter could trigger a positive impact on the Australian markets.

Paul Bloxham, HSBC's chief economist for Australia and New Zealand, told Xinhua of a growing satisfaction within Australian economic circles that China's rate of recovery was consistent with HSBC forecasts and that China could again lead the region out of the turbulence of 2012.

"We think the Chinese economy has already bottomed out, we think that growth will lift into the fourth quarter of this year and then we think growth will lift again into 2013," Bloxham said.

The former Australian Reserve Bank economist quashed speculations of another stimulus-led rebound as he supported the Chinese government's policy of subtle and targeted economic management.

Bloxham said that he thinks China's growth will lift from about 7.8 percent to 8.6 percent this year.

HSBC has previously emphasized the efficacy of China's reform agenda in distributing benefits across the entire region.

"China has a broad reform agenda and it really is necessary that it has such a reform agenda. I think in terms of their trading partners they're going to benefit a great deal if the Chinese economy manages to grow at the sort of rates we've seen recently," Bloxham said.

Echoing Treasury forecasts that while the wild days of double- digit growth are now in the past, Bloxham suggested that China could still achieve growth targets that would be just wishful thinking for most of Europe.

"China's economy has obviously slowed down from double-digit growth but we think they can still maintain 8 or 9 percent growth if they do manage to pull off the reforms that they have in mind," Bloxham said.

The Australian government's Asian Century White Paper has projected the Chinese economy to grow at an average of 7 percent until 2025.

Treasury remarked that while this represents a slowdown from the historic double-digit growth that China has experienced over the past 30 years, it is still a figure that will play an enormously influential role in global economy over the next decades.

"This robust pace of growth appears to be much more sustainable than the continuation of the double-digit pace of past decades," Treasury said.

While the news from Sydney has been roundly positive, external factors continue to contribute to global fiscal instability, with the shifting currency tides providing challenges for both Chinese and Australian monetary management.

"It's a tricky position to be in at the moment with the developed world pumping a lot liquidity into the system and of course trying to drive down their currency to some degree that puts pressure on currencies like the RMB obviously upward pressure and it means that the economy is less internationally competitive simply because of the currency," Treasury said.