In winding back the property bubble China is lessening the demand for iron and steel, which lessens the demand for the import of iron ore from Australia.
Inflation and mounting debt also worry China’s policymakers, and its steelmakers are facing second-half losses.
UBS economist Wang Tao warned, "April data will likely show that the momentum of China’s economic activity has peaked. Industrial production, retail sales and fixed investment all remained buoyant in April, helped by strong construction activity, recovering exports and surging auto sales. However, sequential momentum has peaked and slower growth is expected in the coming months."
Which is bad news for Australia, because it is becoming dependent to a degree on the Chinese economy. Last year China was Australia’s largest trading partner with two-way trade worth $75 billion. And China is Australia’s leading export market, now ahead of Japan.
Wang continued her forecast, "A slowdown in property construction and some price correction seem inevitable at this moment." For Australia this is not good news.
The Australian reported that for Australia, China still looks rosy in the short term, with March copper and iron ore imports surging towards last year’s highs. And there was better news for miners during the week, as China’s largest steelmaker, Baosteel, admitted it was buying iron ore on a short-term contract basis.