Publish date:

The Worst For China's Economy May Not Come Until 2016 – IHS

China's latest move to cut interest rates may be more about supporting the country's fragile economy than helping to support Chinese stocks.

China's latest move to cut interest rates may be more about supporting the country's fragile economy than helping to support Chinese stocks. IHS' Director of Sovereign Risk Jan Randolph said, 'China is trying to rebalance its economy. It wants to move away from investment being 50-percent of GDP, the biggest driver and that could be broken down into real estate as well as factories. Right now, there’s excess capacity, ghost cities and they have to make all this bad debt related to it accountable. That’s a huge structure reform project, usually on average takes 3 or 4 years. Meantime growth suffers. They’ve now got interest rates at 4.6-percent.' Randolph said U.S. and European investors had forgotten the spillover effect that 7-percent annual growth had to other parts of the world. China was a large portion of emerging market growth that was fueling a global surge. Now, the slowdown could have a wide-reaching impact. Randolph said, 'Many countries in Asia are impacted. We’ve also seen the impact in Latin America. China has also taken the wind out of the sails of oil and a whole range of other commodities and that’s been a double whammy for other emerging markets and they may now also be faced with a hike in interest rates and the U.S. Fed.' IHS says it expects China's economy to grow at 6.2-percent in the second half of 2015, that's nearly a full percent lower than the first half of the year. But, Randolph worries the worst is yet to come. TheStreet's Rhonda Schaffler has details from New York.

TheStreet Recommends