What does China's Year of the Monkey have in store for the global economy?

On Monday 8 February, the Chinese will celebrate the start of their new year. The Year of the Monkey is believed to be one of the unluckiest years in the Chinese calendar, and with the economy in China causing ripples of worry around the world, it may well live up to its reputation.

However, while many reports of the Chinese economy and its recent downturn have focused on the negatives, we at Corrotherm remain positive about the future impact within our industry.

Certainly, there are causes for concern. The Chinese economy finished 2015 with a slower-than-expected growth of 6.9%. Add to that the fact that crude oil has hit a low of under $30 a barrel, and it seems there is plenty to worry about. Given that China is the second-largest economy in the world, accounting for a huge share of the global demand for oil, it is inevitable that the price of crude oil is impacted by changes to the Chinese economy.

Even so, these figures for growth must be looked at in context. Almost 7% growth for any economy is a healthy figure – although how accurate that number is, is up for debate – even more so for a market that is still emerging. Any evolving market will start to slow down after an initial fast growth spurt; China’s decline in growth has proved more stable than many others before it.

The market decline in China will lead to slower and more sustainable growth, which is stability that the global market will need in the years ahead. Talking to the LA Times, Francis Cheung, head of China/Hong Kong Strategy for Hong Kong-based brokerage CLSA, said: “This is so-called new normal, which means China will go from a high growth rate to a slower and more sustainable growth rate. It will take [at least] two to three years for the economy to be on the stable growth path.” This sustainable growth path will benefit the global economy long term, though it may take until at least early 2017 to see the signs of recovery.

This careful tapering off of growth in the economy can be controlled to an extent by the Chinese government, which means that although a continued decline in the market is expected, it should be able to prevent a collapse through careful policy decisions.

China remains a powerhouse, and industry is essential to serve its large population. This means that while the world might be panicking about the latest statistics and its potential effects on the global economy and the energy industry in particular, there will remain a need for oil and therefore alloys for the E&P industry, as well as other sectors. And we’re confident that it won’t be too long before that demand starts to grow once again.

If you would like to talk to a member of the Corrotherm International team, you can contact us here, or telephone our UK head office on: +44 (0)23 8074 8100.