26 Jul 2012

Eurozone risk to China's growth prospects

8:00 pm on 26 July 2012

The International Monetary Fund has warned that the worsening eurozone debt crisis poses a major risk to China's growth.

The IMF says it expects China's economy to grow by 8% in the current financial year, but that a lack of response to the deteriorating eurozone situation may cut that figure by half.

The eurozone is a key market for Chinese exports, so if European consumer demand drops, so will exports to the region.

The IMF says China also faces domestic risks, not least from a sharper-than-expected property market decline.

However it says China has the fiscal tools to respond forcefully to any economic developments.

Meanwhile Japan has posted its biggest ever trade deficit for the first six months of this year - nearly $US40 billion.

The main reason was the need to import oil and liquefied natural gas to fuel power stations.