China economic reform may yield surprises
Success in Beijing's stimulus measures could spill over to other world economies, but debt concern and weak manufacturing data cast cloud
What if China's stimulus and reform measures work? They could boost annual gross domestic product by US$5.2 trillion by the end of the decade. They could also help turbo-charge annual growth in the world's four largest economies by an additional US$10 trillion and the rest of the world by an extra US$8 trillion.
While a recent flurry of underwhelming data from the world's second-largest economy has focused analysts' minds on downside risk, China's fiscal and structural reform programme could yet yield surprising dividends.
Mapping growth trajectories for China, India, Japan and the United States, analysts at Bank of New York Mellon are working on just that assumption. If ambitious reform agendas for the three Asian nations succeed and a durable recovery takes hold in the US, the bank said in a report, they would combine to drive consensus-beating growth rates for the four economies.
"If these four economies were to fire on all cylinders at the same time, it would lift growth and trade in the rest of the world, reverse the slide in commodity prices, and underpin a further rally in global share prices," bank investment strategist Simon Cox wrote.
Oil would rise above US$100 a barrel and major stock markets would hit record highs.
It is an optimistic forecast, and not without caveats.
