In its outlook for China, Principal Global Investors stated it believes GDP growth will be around six to eight per cent.
While China is accustomed to GDP growth closer to 10 per cent, it still rivals the rate of growth of many developed nations.
Principal Global Investors’ chief global economist, Bob Baur, and economist Robin Anderson said the slowdown in growth for China and emerging markets is partly due to the end of the commodity supercycle.
Mr Baur and Ms Anderson said record-high commodity prices led to an increase in supply at the same time that demand growth was peaking.
“Supply has caught up to demand and prices have been flat or off their peaks.”
The end of this supercycle could have significant implications for China’s relationship with other emerging markets.
Many emerging countries depended on commodity exports to China to drive their economies and with this growth in China slowing so too has the demand for these commodity exports.
Rising inflation is another significant concern for emerging markets in 2014.
While some emerging market central banks have begun increasing interest rates to combat inflation, this could further impact economic growth.
“All this is not to say that economic growth in emerging markets is ‘slow,’ just slower,” said Mr Baur and Ms Anderson.
Principal Global Investors also predicts that Chinese workers may be less competitive in the global labour market due to strong wage growth.
Demographic trends, economic prosperity and a limit to China’s vast under-utilised supply has driven wage growth in China, according to Principal Global Investors.
“This, combined with structural and bureaucratic challenges of doing business in China, has led some US firms to bring manufacturing back home,” said Mr Baur and Ms Anderson.
