ADB head warns about impact of China slowdown, U.S. monetary policy change

Kyodo

The Asian Development Bank will closely monitor how China’s economic slowdown and the U.S. central bank’s possible scaling down of its asset purchases will affect the economies in the region, ADB President Takehiko Nakao indicated Wednesday.

“Chinese exports are clearly slowing down . . . and they may not maintain their previous momentum,” Nakao, former vice finance minister for international affairs, told reporters at the Japan National Press Club in Tokyo.

If China’s economy languishes, that “would certainly affect some neighboring countries,” including South Korea, whose economy heavily relies on exports, said Nakao, who became president of the 67-member Manila-based ADB in late April.

But Nakao added that the world’s second-largest economy is unlikely to face a “big downturn” in the short term, given that China is trying to take steps to achieve more balanced economic growth that is not too dependent on the real estate sector and capital spending.

On Tuesday, the ADB downgraded its growth forecast for China’s economy. It is now forecast to expand 7.7 percent in 2013 and 7.5 percent in 2014, compared with the ADB’s previously forecast growth of 8.2 percent in 2013 and 8 percent in 2014.

As for the U.S. Federal Reserve’s monetary policy, Nakao said Asian countries, including Indonesia, have “become vigilant against an unwinding” of the central bank’s easing efforts.

As speculation is growing over the Fed reducing its asset purchases with the U.S. economy picking up, stocks have been falling in some emerging economies and the value of their currencies has been plunging, darkening the outlook for their economies.

  • Harold Cage

    The ADB remains consistent in adding two points to all outlooks on China based on hope. They will be lucky to make 7% in 2014 unless local concerns are addressed.

  • Daisuke

    cue TPP