Access confident on China

Access Economics believes demand from China will underpin good growth for Australia over the coming year, even though the Chinese, themselves, are now worried about their prospects.

Premier Wen Jiaboa has warned this week that China has a “most difficult year” ahead.

“There are uncertainties in international circumstances and the economic environment and there are new difficulties and contradictions in the domestic economy,” the Chinese leader said in an official paper, which he prepared for China’s State Council
It’s not just that Chinese trade with America is threatened by the now apparent slowing of the US economy. China also has vast reserves of cash, invested in $US securities.

Access admits that much of Australia’s economic fortunes this year are tied up with Chinese growth, which has been running in double digit figures.

Its economists are basing their argument on their assessment that increased domestic demand in China will take up any slack, that a US slowdown might inject into the order books of Chinese factories, over coming months.

In the latest issue of its Investment Monitor, the forecaster notes that new Australian projects, worth a total of $353.3 billion are currently being planned.

Access says Australia’s resources sector is the most direct beneficiary of Chinese demand.

“Massive investment dollars are being aimed at LNG, iron ore and coal in particular,” Access said.

“And were it not for skill shortages in WA, investment levels would be considerably higher still,” the forecaster added.

Its optimistic assessment supports advice that officials in Canberra have been giving the Federal Treasurer, Wayne Swan.