China has too higher growth rate: Adrian Mowat of JP Morgan Chase

Adrian Mowat, Chief Asian & EM Strategist, JP Morgan Chase talks to ET NOW about Chinese economy.

How worried are you now, since you are now underweight China? How worried are you about all this talk of the Chinese government pricking the property bubble?

Look, the Chinese government does a superb job of managing this huge economy. You have had protracted periods of time of high growth of relatively low inflation. The Chinese economy at the moment is growing at 13%, that in our view is too higher growth rate. We have been looking for something between 8-10%. One of the reasons that growth is so strong is we have got the residual effect of last year’s huge stimulus programme, which was focussed on infrastructure and on property.

What we are expecting the Chinese government to do is to gradually ease back on fixed asset investments to control the property market and what you will see is growth in China slowing to somewhere between 8-10%. That will have an impact on global commodity prices, particularly iron ore and steel.

And we moved underweight Brazil last week because we think investors are far too complacent about the outlook for steel and iron ore prices. Has the Chinese economy slows down its fixed asset investment, we do expect consumption and export to remain robust.