The Chinese market falls, and growth slowdown, have shocked the world; and nations like Australia, which have enjoyed economic buoyancy because of China’s appetite for their commodities are now suffering. As Chinese stocks tumble and the growth rate slips down to around 6.9%, a certain amount of panic has set in among many economic commentators. Australia’s ability to avoid the global economic crisis was predicated on the strong Chinese economy and its demand for our minerals. Some of these experts are predicting Australia being dragged down into recession on the back of our dependence on the Chinese economy.
How Will It Affect the Real Estate Market?
Will the Chinese financial crisis affect Asians in Australia in particular? The obvious answer is yes, and I would look to the real estate market firstly. Chinese investor demand for high end Australian real estate has been stimulating the Sydney and Melbourne property markets for decades now. With the stock market falls in China will there be even more investment in Australian property, or will there be less? There are arguments to be made for both of these reactions to occur. Chinese investors may seek the safety of the Australian property market for their money, or, conversely, losses on the stock market in China may see fewer wealthy Chinese in the market for high end Australian real estate.
What About Asian Business in Australia?
Asian businesses based in Australia, which are linked to underperforming businesses in China, will be adversely affected by the financial crisis in that populous nation. Those involved in tourism will most likely suffer, as fewer Chinese people holiday in Australia. The devaluation of the Yuan makes Australian commodities and everything else more expensive for Chinese business and its people. Chinese imports into this country will become a bit cheaper, and exporting competitors Indonesia and South Korea will have to lower their prices to maintain market share. China has had its part to play in lowering global oil prices and this will continue with oil falling to below $30 a barrel.
The Devaluation of the Yuan
The fate of all businesses directly, or indirectly, linked to the Chinese market will see slow growth and, for some, collapse. The devaluation of the Chinese currency may stimulate more international demand for Chinese products, but this will take time. In the interim, Asians in Australia may feel the brunt of a rapidly slowing economy. Australians of all descriptions will be affected by this drop off in demand for commodities. When the mighty dragon falls from the sky, all those lesser entities riding on its coat tails will also come crashing down to the earth. How great the pain is hard to predict, but their will be pain.
ACM Group would be interested in hearing from you if the falling Chinese market is personally affecting you and your business, please get in touch with us to do a feature on your business and the strategies you’re putting in place to combat the economic downturn.