Is China really Crashing? Concern for Australian property.

Would a decline in China impact Australian property?

One of the most common questions I hear is ”What if China crashes and they take all their money back?”

It’s a scary thought at first, but the true answer is doubly positive!!

The Sky is NOT falling on China

China is not experiencing anywhere near the economic slow-down that the fear-promoting media would have us believe. My view is that China is accelerating in this third quarter of the year, most likely to around 7.3% economic growth. This is on the back of an astonishingly fast pace of 7.0% all through the first half of the year. In fact, China has been the most stable economy in the world so far this year.

This is not what the doomsayers were telling you or expecting. But we’ve all heard the ‘end of world’ zealots before.

Even yesterday we saw an improvement in the main manufacturing indicator for China. This is called the manufacturing PMI and it moved up from 49.7 to 49.8 in September. As this is only a slight improvement, I tend not to pay too much attention to such small movements in economic data. They are only sample surveys after all -something most people forget when they get so excited about even slight changes in economic data.

Nevertheless it is a positive, but what I particularly liked is the steady improvement in the expected production and business activities index.  This was remarkably strong at 54.1.

There is no manufacturing crash evident in any of the data this year. The negativity is imaginary. The reality, on the other hand,  is robust Many experienced and senior people in industry and government support what I have been saying-  It is only 'financial market' economists and negative media types that talk fictionally of China being in trouble. It simply isn’t!

China is growing at 7.0%, and I still expect is currently accelerating in real time toward 7.3% this third quarter of the year. 

China PMI Manufacturing        Source: China National Bureau of Statistics

Australian Property would skyrocket

Even if China were to be in some form of economic or even political trouble, the irony is that this would see wealthy Chinese having even greater and rapidly accelerating interest in buying Australian property!

This is another reason to want China to continue to do well. We already have significant competition from Chinese investors buying Australian property. The last thing we need is for the Chinese economy to actually be in trouble (which it isn’t for as far as we can see) which would catapult Australian prices even higher.

So the perfect outcome is what is happening right now -  a sustained and strong growth path for the Chinese economy that delivers firm, but not manic, interest in the Australian property market.

Clifford Bennett,

International Economist

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Guest writer Clifford Bennett is an international speaker and author who persists in his view that the world is much better placed than the media would have us think. The AFR call him a Guru, Bloomberg News named him the “Most accurate currency forecaster in the world”. 

Clifford’s accurate economic commentary has earned him international respect and given him the foresight in calling the very start of the DOW JONES rally of the past six years when the media was negative. He has also been bullish about property in Australia since 2008.

Clifford Bennett will be one of our keynote speakers at Property Club's 2016 Wealth & Property Expo on the Gold Coast - March 3-6.  More details available on www.pcevents.com.au