China's Economy in Cyclical Slowdown, Strong Return Expected: Economist

SYDNEY, Sept. 26 -- China's economy is in the downswing of a natural cycle as a result of careful management of inflationary pressures and will continue its extraordinary growth in the medium to long term, a leading economist has told Xinhua.

Paul Bloxham, the Chief Economist for Australia New Zealand of the largest foreign bank in China HSBC, says the present slowdown is cyclical and a strong fourth-quarter return to form is on the cards.

"The recent slowdown in Chinese GDP growth is easily overstated." He told Xinhua in Sydney.

"I think in terms of its importance it does look as though it' s a cyclical slowdown and it makes sense that the Chinese have had a cyclical slowdown.

"They were trying to slow their economy down last year to try to get inflation out of their system and those tight policy settings are still having an impact in slowing growth down and we' re seeing that happen," he said.

Bloxham, one of the Asia Pacific's most influential economists, said the ongoing debt dramas gripping the European Union and the drastic currency manipulation in the form of quantative easing determined by the U.S. Federal Reserve are continuing to hamper global trade.

"The western world has had some big problems, the European financial crisis has had a big drag on global trade, which I think, is slowing the Chinese economy down too," he added.

While the EU debt crisis has clearly impacted Chinese exports -- the numbers continue to grow, though at a decelerating rate. However, China is now far less dependent on its exports as a result of a concerted push to increase domestic consumption; their share of GDP has dropped from almost 40 percent in 2007 to 29 percent in 2012.

Bloxham said, "the Chinese economy has been growing very strongly for 30-odd years now and that's an enormous achievement in the scheme of things -- its reduced poverty substantially in that country and in fact China still hasn't really lifted its GDP per capita yet to developed world standards. It still gets a long way to go."

While during the 2008 slowdown China launched a big spending program, Bloxham noted, this response will be more nuanced.

"We're not likely to see 'shock and awe' in terms of a fiscal response from the Chinese authorities at this point. What we're expecting is a more subtle loosening of the purse strings and a bit more monetary response yet, but again, not shock and awe. So growth, we think, will start to lift but we are not expecting it to rebound strongly into double-digit growth but we expect it to stabilize and lift into next year," he said.

Bloxham described the Chinese growth engine as one of the key drivers of global growth.

"We still think this is a cyclical slowdown for China rather than a structural one," Bloxham said, "we have in mind a bit above 8 percent growth next year."