The outlook for agricultural exports to China looks pretty positive, according to David Dollar from the Brookings Institute in the US.
Writing in the CoBank Economic Outlook report, he said China has overbuilt real estate and won’t need new construction for a long time, even if the overall economy does well.
However, according to the Senior Fellow in Foreign Policy and Global Economy and Development with the private nonprofit research company, there is a big difference between commodities used in construction and food.
He added that China’s middle class will continue to grow and this will result in an increased demand for meat, vegetables, fruits and luxury designer goods from the US and Europe.
The demand for these commodities will continue, he said, even if China’s growth slows to 4%
That’s going to happen under just about any scenario. The big question is, how fast? If China maintains the 7% growth they’ve targeted, they’ll double their GDP in about a decade.
“If they slip down to 4% growth, it’ll take 20 years. China’s actions in the months ahead will be crucial,” said Dollar.
But he added even if these targets are missed there will be still hundred of millions of additional members of the middle class, which is good for both China and the world’s economy.
The Fall of China’s Economy
Through years of global economic volatility, one of the few constants has been China’s remarkable GDP growth of 10% per year since the early 1980s, according to CoBank Economic Outlook for October 15.
According to the member of the $107 billion valued cooperative bank serving vital industries across rural America, this all changed last summer when the Shanghai Index dropped 8% in August.
This drop, it says, erased more than $1 trillion in value from Chinese stocks which equates to a drop of 38% from highs experienced earlier in the summer of 2015.
The Chinese have also devalued their currency, the yuan, by 1.9% against the dollar, which caused China’s official GDP growth figure to sit at 7%, it says.
According to CoBank report, the ramifications of this are troubling since countries around the world have come to rely upon China’s seemingly boundless appetite for everything from raw materials to designer shoes.