Conditions in China are expected to remain sluggish

Through June and July, Chinese equity markets plunged by more than 30%, with declines only arrested after significant policy support was introduced. At this stage, the impact of this volatility on the wider economy is expected to be limited. Nevertheless, it does raise some concerns about the downside risks for growth. 

Of greater concern is that momentum in Chinese economic activity remains subdued. Confidence in the corporate and household sectors remains low, fixed asset investment continues be dampened by weakness in the real estate and industrial sectors, and export growth continues to be weighed down by lingering softness in global trade. 

"We expect Chinese GDP growth to slip below 7% in coming years," notes Westpac Research.

Subdued demand in China, as well as softness in a number of other economies, is weighing on demand for many globally traded commodities. Combined with increases in global supply in recent years, this has resulted in significant downward pressure on a range of commodity prices. These developments will have a pronounced impact on income growth and investment decisions in many countries including China itself.