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Chinese growth slows, tariffs start to bite

The Chinese economy is slowly losing steam after a decade of strong growth.

Bloomberg reported that Chinese GDP came in at 6.5% higher in the third quarter than a year ago. However, this growth was lower than the annual 6.7% growth achieved last quarter.

However, it wasn’t all bad news. Retail sales grew by 9.2% in September, compared to a forecast of 9%. The urban monthly surveyed employment rate was 4.9% at the end of September.

Why does this matter?

China is very economically important for Australia. A strong Chinese economy helps the Australian economy.

Whether you think it’s good or not, tens of thousands of Chinese students go to Australian universities and many ASX companies rely on China for some, or most, of their revenue. Think of BHP Billiton Limited (ASX: BHP), a2 Milk Company Ltd (ASX: A2M), Bellamy’s Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL) to name a few.

The trade war could have a negative effect in the coming quarters. Bloomberg quoted National Bureau of Statistics spokesman Mao Shengyong saying that there was “downward pressure” on China’s economy due to the international situation.

No economy will keep going up forever at 8% per year forever, or whatever some economists would like. Every year that the economy gets bigger it becomes harder to keep growing at the same pace – the mathematics of size is unavoidable.

Foolish takeaway

Despite the slowing growth, I firmly believe that some Chinese businesses offer investors a number of attractive growth opportunities. That’s why I think Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) and UBS IQ Asia ETF (ASX: UBP) could be long-term ideas.

Another ASX share to take advantage of the large Asian opportunity is this top growth share which is now expanding into the region.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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