A report over the weekend showed that Chinese industrial companies’ profits increased 6.3 percent in June from a year earlier. This was well below the 15.5 percent increase in May and added to signs that China's economic growth is slowing.
Bloomberg has a story today looking at the likelihood and implications of a China slowdown to markets.
A copper price collapse of more than 60 percent, zinc cut by up to a half and oil down to $70 a barrel. That’s the fate facing world commodity markets should China’s growth dip to 3 percent in the next three years -- a scenario economists at Barclays Plc (BARC) are now examining.
They’re not the only ones building models based on a steep decline in growth in the world’s second-biggest economy. Nomura Holdings Inc. (8604) estimates a one-in-three chance of a sharp drop by the end of 2014, and Societe Generale SA sees a “non-negligible risk” of less than 6 percent growth this year and an outside chance of 3 percent average expansion for this half and next.
Indeed, Zero Hedge says that there may be “storm ahead” for China.
Demographics, capital accumulation and productivity are the three most important drivers of potential growth, and these three factors are intertwined to a certain extent. China has already entered its first stage of demographic challenge, with its GDP growth slowing on the back of all three contributors of growth...
[G]oing into 2016-20 the second stage of demographic challenge will kick in as we begin to see a decline in China’s working age population resulting in a rise in the age dependency ratio.
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