Issue link: https://maltatoday.uberflip.com/i/628647
maltatoday, WEDNESDAY, 20 JANUARY 2016 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way YOUR FIRST CLICK OF THE DAY www.maltatoday.com.mt China economic growth slowest in 25 years China's economy grew by 6.9% in 2015, compared with 7.3% a year earlier, marking its slowest growth in a quarter of a century. China's growth, seen as a driver of the global economy, is a major concern for investors around the world. The news comes as the International Monetary Fund said it expected China's economy to grow by 6.3% this year and 6% in 2017. Beijing had set an official growth target of "about 7%". Chinese Premier Li Keqiang has said weaker growth would be acceptable as long as enough new jobs were created. But some observers say its growth is actually much weaker than official data suggests, though Beijing denies numbers are being inflated. Analysts said any growth below 6.8% would likely fuel calls for further economic stimulus. Economic growth in the final quarter of 2015 edged down to 6.8%, according to the country's national bureau of statistics. After experiencing rapid growth for more than a decade, China's economy has experienced a painful slowdown in the last two years. It's come as the central government wants to move towards an economy led by consumption and services, rather than one driven by exports and investment. But managing that transition has been challenging. Some argue that China's focus on creating an economy driven by consumption is misplaced. They say as the country attempts to rebalance its economy, it should focus on productivity in order to sustain high growth. "While higher consumption can support growth in the short run, there is little in economic theory that emphasises the expenditure side of GDP as a driver of growth," HSBC's John Zhu said in a note. Zhu also said that China's current stage of development would require more investment, not less, and that the country would rebalance naturally towards consumption and services in time. "Pushing the economy along those paths too soon would be dangerous," he said. Renault to modify 15,000 new cars in emission scare French carmaker Renault, which has been under the spotlight over high levels of harmful emissions, is recalling 15,000 new cars. The move comes after tests showed emission levels from some of its vehicles were too high. Last week, three of the firm's sites were raided by fraud investigators. The searches led to billions of euros being wiped off its market value, after fears that it could be another scandal similar to that at Volkswagen. Renault has promised to come up with a "technical plan" to bring down the level of emissions from its vehicles. French Energy Minister Segolene Royal said Renault was not the only car company in France to break the rules on carbon dioxide and nitrogen emissions, but she did not name the others involved. She said the tests needed to be based on real driving conditions and not those of special testing facilities. It has been suggested that the emission readings are much lower in laboratory-style conditions. "Renault has committed to recalling a certain number of vehicles, more than 15,000 vehicles, to check them and adjust them correctly so the filtration system works even when it is very hot or when it is below 17 degrees, because that's when the filtration system no longer worked," Ms Royal said. "We are working on a technical plan which should allow us to cut emissions," Renault sales director Thierry Koskas said during a presentation on the group's 2015 sales performance. When asked how the test results differed from those conducted under real conditions, he said: "Renault did not cheat... We are not using any software or other methods." IMF downgrades global forecast The International Monetary Fund has downgraded its forecast for glo- bal economic growth. It now expects economic activity to increase 3.4% this year followed by 3.6% in 2017. That means growth of 0.2% less each year than when the agency last published a forecast in October. And there are warnings about the risks. The report says that if key challenges are not successfully managed, "global growth could be derailed". In many respects, the picture is a familiar one. The recovery after the financial crisis continues. But in the rich countries, it is still "modest and uneven". Only three large advanced economies are forecast to beat 2% growth this year: the US, the UK and one of the eurozone's crisis-hit nations, Spain, which has had its forecast upgraded. The report describes the picture for many emerging and developing economies as "challenging". The largest downgrade for any individual economy is Brazil, where the IMF now predicts a contraction of 3.5% this year and no growth at all in 2017. That reflects the political uncertainty arising from the investigation into corruption at the oil company Petrobras. Russia, hit by the decline in prices of its oil exports, is also likely to remain in recession this year before returning to modest growth next year. Several other oil exporters are also looking at weaker performance than previously forecast. Higher borrowing costs and lower commodity prices are weighing on several of the larger economies in sub-Saharan Africa - Nigeria and Angola, which are oil exporters, and South Africa. Higher borrowing costs are linked to the actions of the US Federal Reserve. It raised US interest rates last month and it's expected to take further similar steps this year. That has led to higher borrowing costs for many borrowers in other countries. China's widely reported economic slowdown is a central part of the unfolding economic story. It's reflected in the fall in commodity prices which have been affected by slowing Chinese demand. In this report, however, there is no further change of the forecast for the country - growth this year of 6.3% and 6% in 2017. For Asia's other large emerging economy, India, there is also no change to the forecast with growth predicted at 7.5% over both years. There are, inevitably, risks even to this decidedly lacklustre forecast. China is one of them, the possibility that the slowdown might be unexpectedly sharp. The expected rise in interest rates in the United States could raise interest rates further for many other countries. It has already led to a stronger dollar, as investors take money back to the US to get the benefit of those higher rates. For those borrowers who have debts in dollars, they will be more expensive to repay. There is also the danger of what the report calls "a sudden rise in global risk-aversion", where financial market investors become more inclined to sell assets seen as relatively risky and go instead for the safe ones - such as US, German, and British government bonds and gold. There has been a hint of that already this year, as markets got 2016 off to a very stormy start.