Global Macro: China Projections Lowered
Numbers released Tuesday show that Chinese industrial production came in below expectations. Slowing fixed-asset investment could lead to potential headwinds in economic growth in coming months. This is concerning due to China's wide reach of influence in the global economy.
The Chinese economy is important due to both its import and export functions. It imports raw materials from surrounding emerging markets, especially commodities from Australia. When demand for its export market decreases, revenue and cash flow to raw material producers fall. This can have negative ramifications for emerging market growth projections.
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China's export market is similarly important to the global economy. It exports many low cost products to developed countries and adjusts business spending and investment based on expected output. Weaker output signals developed countries may have slowing consumer demand, which can weigh on profit margins and lead to equity market declines.
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