New Zealand To Expect A Hit From China's Slow Growth; Business Confidence Drops Slightly

A sharp decline in China’s growth is expected to hit exporting countries like New Zealand and Australia and the effect could reach other Pacific Island nations. The New Zealand dollar has reached its lowest level in almost two weeks after trade data from China remained weak.

The New Zealand dollar had touched a low of 74.20 U.S. cents and traded at 74.40 cents from 74.49 cents as of April 13, reports New Zealand Herald. According to China’s trade data, export sales had decreased 15 percent in March 2014, while imports decline to 12.7 percent. Both the New Zealand dollar and Australian dollar fell sharply following the news of China’s slowdown. China is one of New Zealand and Australia’s biggest trading partners.

Effect of Chinese Growth Slowdown

The World Bank said in its recent East Asia Pacific Update that it has lowered its 2015 forecast for Asia’s largest economy from 7.2 percent to 7.1 percent. The institution believes a sharp slowdown is unlikely in China but if it happens, there would be huge spillovers across the region.

Kymberly Martin, senior market strategist at the Bank of New Zealand, said in a note that the unexpected slowdown in China exports may have been due to seasonal disruptions rather than “soft demand.” However, he noted that import figures remain week. He believes the market remains sensitive to any signs of weakness in the Chinese economy.

NZ Business Confidence Drop Slightly

Meanwhile, business confidence in New Zealand has dropped slightly, according to the quarterly survey of the Institute of Economic Research. The March survey results revealed business confidence has fallen compared to the December quarter.

However, the institute said that despite the slight drop, businesses in the country remain generally optimistic about the economy. Christina Leung, a senior economist of the institute, said there were several factors that motivated businesses to have a positive outlook.

Leung said New Zealand has low interest rates, strong housing market and high employment growth. She believes these factors make New Zealand conducive for business growth.

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