World
China slowdown would hit global growth hard, says Fitch
A sharp slowdown in China's GDP growth rate to 2.3% during 2016-2018 would disrupt global trade and hinder growth, a study carried out by the ratings agency reveals
 
A sharp slowdown in China's GDP growth rate to 2.3% during 2016-2018 would disrupt global trade and hinder growth, with significant knock-on effects for emerging markets and global corporates, says Fitch Ratings.
 
'After tracing China's financial and trade links around the world, it's clear that a greater-than-expected deceleration in Chinese economic activity would have far-reaching implications for global growth, corporate credit quality and monetary policy," says Bill Warlick, Senior Director, Macro Credit Research at Fitch.
 
 
According to a study conducted by the ratings agency, in turn, this would keep short-term interest rates and commodity prices lower for longer. This hypothetical scenario does not reflect Fitch's current expectations for China's growth, the agency said and is designed to test credit connections between China and the rest of the world.
 
"China's rapid rise as a global economic power, and its deepening ties to the rest of the world, have forced global credit investors to weigh carefully the potential impact of a sharp China slowdown," Warlick added.
 
Prolonged Impact on Growth and Rates
Fitch says, the hypothetical Chinese slowdown scenario, framed with the help of Oxford Economics' Global Economic Model, would slow global GDP growth to 1.8% in 2017 from Oxford's August base case of 3.1%. As a result, any rise in US and Eurozone short-term interest rates would be postponed, and oil prices would remain under pressure. 
 
'Lower-for-longer in terms of growth, interest rates and commodity prices, could be the defining mantra of this decade for the major advanced economies if a Chinese shock scenario materializes,' Warlick said.
 
Corporate Impact
According to the study, a slowdown in China scenario would also impair the credit profiles of many companies globally, particularly commodity-dependent ones in oil and gas, steel, and mining. 
 
 
The focus of impact from a sudden slowdown remains generally unchanged from 2010, when Fitch and Oxford conducted a similar study. 
 
Shipping companies would also suffer, as commodities account for a significant portion of freight volume. The global technology, heavy manufacturing and automotive sectors would also feel increased credit pressure due to a slowdown in Chinese demand. 
 
'A sharp China slowdown would further impair credit quality for oil & gas and commodities companies already pressured by the current low-price environment,' says Andrew Steel, Managing Director, Asia-Pacific Corporates. 'Knock-on effects like anaemic or slowing global consumer demand and commodity supply gluts would persist or worsen.'
 
Within Fitch's rated portfolio, 25% of oil & gas companies and 52% of other commodities companies are already sub-investment grade. If the scenario materialized, it could create ripple effects through the high yield bond market, the ratings agency said.
 
Geographic Impact
The impact of a China slowdown would be felt most in Emerging Markets, particularly in Asia and Latin America, due to the high concentration of China's largest trade partners in these regions.
 
'While China's share of imports from within the Asia-Pacific region have fallen slightly since 2009 as its trade and investment ties to other regions increased, the region is still far more closely tied to China's economy than any others,' says Andrew Fennell, Associate Director, Sovereigns.
 
 
In particular, Korea, Taiwan, Hong Kong, Japan, Singapore and Australia would all face trade-based GDP slowdowns. Hong Kong would experience a contraction of GDP in 2016 of more than 3% lower than Oxford's base case. Japan would also enter a recession in 2016 and 2017.
 
In Latin America, commodity-related exports represent the vast majority of all regional exports to China, leaving the region highly exposed to a sudden slowdown scenario. Chile is most sensitive to a shock, with GDP potentially deviating by 7% from Oxford's base case under the scenario. Softer commodity prices and Chinese demand would push 2017 growth rates in Chile and Brazil down by 4.5 and 1.6 percentage points, respectively.
 
The US and Europe rely less heavily on Chinese trade to drive growth, insulating them from a Chinese shock scenario to a greater extent than their emerging market counterparts. Of the Western developed markets, Germany's larger share of exports to China leaves it most exposed. However, at only 2.4% of its GDP, the impact would be relatively limited. In the US, a sharp deceleration in Chinese growth resulting in reduced import demand could drive the bilateral trade deficit with China wider.
 
Fitch says its China Slowdown Scenario assesses the impact of a hypothetical slowdown in China's economic growth rate. Using Oxford Economics' Global Economic Model, Fitch focused on the potential credit implications across a broad range of rated issuers over the three-year forecast period through year-end 2018. The shock scenario assumes average Chinese GDP growth of 2.3% over that period, materially lower than Fitch's 2017 base case of 6.0%, the agency concluded.

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House of Kejriwal's secretary raided, not CM's office: CBI
The CBI on Tuesday said it conducted raids at 14 different places in Delhi and Uttar Pradesh, including the house of Delhi Chief Minister Arvind Kejriwal's secretary, after obtaining warrants from a court but termed as baseless the reports that the chief minister's office was among these.
 
"The CBI has registered a case against a senior civil servant of the Delhi government and six others on the allegation that during the period 2007 to 2014, he, along with others, abused his official position in awarding contracts from the Delhi Government to a private firm. 
 
"After obtaining warrants from the competent court, searches are in progress at 14 locations today (Tuesday) in Delhi and Uttar Pradesh," Central Bureau of Investigation (CBI) spokesperson Devpreet Singh told reporters at the agency headquarters here.
 
She said reports from certain quarters regarding a search at Kejriwal's office are baseless.
 
"CBI emphatically denies having searched the office of Delhi chief minister. False propaganda should not be used to impede our investigation," she added.
 
The CBI spokesperson had earlier said that documents related to three immovable properties along with cash were recovered from the residence of Rajendra Kumar, principal secretary to the Delhi chief minister. The agency said it has recovered Rs.2.4 lakh and an additional Rs.3 lakh in foreign currency from Kumar's house.
 
Kejriwal claimed that the CBI had raided his office and called Prime Minister Narendra Modi a "coward".
 
The CBI also said that Kumar was not cooperating with it in opening his email accounts.
 
It said another Rs.10.5 lakh had been recovered from G.K. Nanda, who it claimed was a co-accused with Kumar in a case of corruption. Nanda is the general manager of Telecommunications Consultants India Ltd (TCIL).
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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GM India recalls 101,597 units of Chevrolet Beat Diesel
General Motors India on Tuesday recalled 101,597 units of Chevrolet Beat Diesel which were manufactured between December 2010 and July 2014.
 
According to the company, it will inspect and, if necessary, replace the clutch pedal lever in the vehicles. 
 
"The clutch pedal lever in these units is susceptible to cracking on continued usage," the company was quoted in a statement as saying.
 
The company informed that it has started voluntarily notifying owners of the Beat Diesel to take their cars to any of Chevrolet's 248 authorised service centres across India. 
 
"Quality and care are our highest priorities and we are committed to putting customers at the centre of everything we do," the statement said.
 
"Alternatively, customers can also contact their nearest Chevrolet dealership and schedule an appointment for vehicle inspection and correction."
 
The company added that it is working closely with its service network to make the entire inspection and correction exercise as smooth as possible.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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