Why Chinese investment matters to Australia

Excess capacity through overinvestment and the slowing pace of urbanisation will weigh heavily on China's investment outlook, which in turn will have consequences for Australian iron ore producers and the broader economy.

Will there be a more important driver of Australian growth over the next decade than Chinese investment? The near-term prognosis for investment is reasonably good but iron-ore producers must be getting nervous as prices decline and demand shows tentative signs of slowing and Chinese authorities look to curb excess capacity.

Investment has been a major driver of China’s economic success story. Real gross fixed capital formation has increased by an average annual rate of 11 per cent since 2000, although this has declined a little in the past couple of years.

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