As it looks increasingly likely that the oversupply of housing in China, and ongoing collapse in property prices, will result in a hard landing, as the new regime is unwilling toi take the usual eponse of increasing ;liquidity, it is useful to look at what econimies this will most effect. Austrialia of course dependent on mineral exports is the top of everyones list, but the UAE, experiencing again its own new housing bule should be next – why?
A hard landing for the Chinese economy would crimp growth in the Middle East through a fall in oil prices, new research has found.
“A hard landing in China would mean the Middle East would experience weaker exports, lower tourism and business activity and probably a resurgence of risk aversion by global companies due to this new deterioration of the global economic situation, just at the moment when they thought the situation was finally improving,” said the IHS chief economist, Nariman Behravesh.
IHS is working with its clients, which include multinationals and government-owned companies, on developing a contingency plan for such a scenario.
China is one of the largest consumers of oil from the Arabian Gulf, with about a third of Chinese energy imports coming from the region.
The pace of the Chinese economy has cooled in the past two years, with annual GDP expansion slowing to 7.7 per cent, its lowest level since 1999. But growth in the world’s second largest economy still remains above many other emerging markets and the developed world.
With the economies of China’s largest export markets – the US and the EU – in gradual recovery, the most likely cause of a Chinese hard landing would be the collapse of its shadow banking system after several years of rapid expansion.
“China has quite a significant debt bubble on its hands,” Mr Behravesh said. “In the last seven years, the ratio of total debt to GDP has doubled. It now has debt levels comparable to the US in 2007, that’s very risky.”