China is slowing ‘permanently’ and the rest of Asia needs to adjust to the new norm - ANZ

Asian economies need to focus on propping up their domestic economies as China’s slowdown looks like it’s here to stay, said the chief economist and head of research at Australian bank ANZ, Richard Yetsenga.

“For the region, it’s increasingly about having business models which fit a world where China is growing much less quickly, and where trade is much less easy than growth support. That means increasing domestic demand, and that means getting domestic financial systems right,” Yetsenga told CNBC.

Ten years ago, China began the structural adjustment as its economy grew at 12%, he said, noting it’s never gone back to that rate of growth.

“I think we all need to accept that China is slowing structurally — we use the word ‘structural’ and really, we mean ‘permanently,’” he said.

“My expectation is, we say goodbye to (6% growth), it’s very unlikely we ever get back to (6% growth). I think this is a permanent slowdown in China,” said Yetsenga.

Businesses in other Asian countries will need to adapt to an environment where China is growing less quickly and trade is more difficult, Yetsenga explained. If trade improves next year, that’s good news for Asian economies, he added.

The problem is that the financial systems in some countries haven’t been able to deliver domestic growth — and that’s “probably Asia’s key issue for 2020,” Yetsenga said.