LatAm Resilient to China Slowdown

Despite overall bullishness about growing trade links between LatAm and China continuing to drive LatAm growth, many countries in the region are not wholly dependent on it. “For the most part, countries are much more reliant on their own growth than on China’s growth,” says Doug Smith, economist at Standard Chartered. He explains a slowdown in China’s growth means commodity prices could suffer, and there would be less reserve accumulation, but most countries are net creditors. Brazil’s growth is particularly tied to domestic consumption, which would shield it from any drop in Chinese demand. “I’m quite pessimistic about the long-term outlook for China,” says Michael Pettis, professor at Beijing University, noting that the current investment boom is unsustainable, as trade balances readjust in the deleveraging following the crisis. Pettis notes, however, that even if the likely bumps ahead mean Chinese GDP growth of 5%-6% per year instead of 8-9%, that is still better than most economies. Both spoke on a panel at the LatinFinance Latin America China Investment Forum last week in Beijing.