Wednesday, August 19, 2009

Addendum: Spoke Too Soon on China/Australia

In my previous post, I pointed out the dependence of the Australian economy on exports to China. There, I said that as long as the Chinese government's stimulus program didn't change Australia would likely fare fairly well during the rest of this recession.

It seems as if I spoke far too soon.

I was just surfing through Reuters when I stumbled upon this news article:

BEIJING (Reuters) - The Chinese government is attempting to pass the baton of growth from state-funded infrastructure investment to the private housing sector, a risky but necessary move to sustain the economic recovery.
Construction cranes sprouting in big cities, busy furniture shops and soaring property sales all show that the transition is going smoothly so far, though officials are wary that house prices may rise too high, too quickly.
The rest of the article is about the Chinese government's fears about the housing market heating up too fast. No further comment is offered on how state-funded infrastructure investment is being reduced, if in fact it is. I don't know the intricacies of the Chinese economy enough to be able to comment on how this will effect Chinese raw materials imports from Australia. Nonetheless, this seems to complicate the situation and what I stated in my previous post.

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