Australia’s Central Bank Sees China Slowing to About 3% by 2030

(Bloomberg) --

The Reserve Bank of Australia sees China’s economic growth halving to around 3% by 2030 as low birth rates, efforts to wind back corporate debt and low productivity combine to slow its expansion.

“China’s period of ‘above-normal’ growth is drawing to a close,” the RBA’s Ivan Roberts and Brendan Russell wrote in a research paper Thursday. “This will create challenges for policy makers, as they attempt to foster continued increases in incomes, while forestalling risks arising from high levels of debt.”

China’s annual GDP rose 10.6% in 2010, but has steadily slipped as authorities sought to switch the drivers of growth to consumption from investment. Given policy makers’ commitment to re-balancing and the difficulties of reversing China’s population dynamic, the RBA economists see greater productivity, particularly through technological innovation, as key to supporting China’s economy.

Policy makers are currently meeting in Beijing for the annual Central Economic Work Conference, where policies and goals are set. The official GDP target for 2020 is likely to be lowered to “around 6%” from a “6-6.5%” range this year, according to a Bloomberg survey.

As Australia’s largest trading partner, China’s outlook has implications for export growth and broader prosperity -- particularly as the goods and services traded between the nations have expanded over time.

“The depth of these linkages means that the potential for growth in China to slow further, either gradually or sharply, represents a significant risk for the Australian economy,” Roberts and Russell said.

The RBA’s views on China are often tracked by investors because of Australia’s leverage to the fortunes of the world’s second-largest economy. Australia’s central bank has one of three international offices in Beijing -- solely for economic analysis, rather than for trading, which is the main function of the New York and London locations.

To contact the reporter on this story: Alexandra Veroude in Sydney at averoude4@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael Heath, Michael S. Arnold

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