Impact of economic slowdown in China

In recent years trade between China and Australia have increased from approximately 3.6 billion Australian Dollars in 1991 to a record 121 billion Australian Dollars. Most of the trade came from demand for Australian iron ore and as a result the Australian unemployment rate went down to 5.1 percent from an average of 7.8 percent of the previous decade. However, things are changing for both countries, especially bad news for both.

The Chinese economic growth is expected to slowdown to about 7.5 percent, the lowest since 2004. The Australia will be the hardest hit. The export of iron ore from Australia to China has tumbled by about 25 percent due to the slowdown in the Chinese economy causing a slowdown in Australian economy. China buys about 28 percent of all Australian exports.

Rio Tinto, BHP Billiton and Fortescue Metals Group are the three biggest iron ore miners in Australia. BHP Billiton recently announced that it is delaying the proposed $33 billion expansion in Australia. Fortescue cut its capital expenditure by about 26 percent. The strengthening Australian dollar is also contributing to the lower purchases of iron ore by China. As a result Australian GDP is expected to grow by about 3.6 percent a year.

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elegant on September 3rd 2012 in Finance

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