China will continue to make a sizable contribution to the global economy, as it grows off a much larger base than that of ten years ago, said Australian Treasurer Scott Morrison.
Although Moody's recently downgraded its outlook on Chinese government debt from "stable" to "negative," Morrison believed Moody's is at the same time recognizing the continued strength of the Chinese economy.
"As our No. 1 trading partner, China will continue to present opportunities for Australia to continue to grow our economic prosperity," he told Xinhua.
Morrison noted that China's transition away from China's investment-led growth model to one more reliant on consumption and services is not without risk.
"However the authorities appear to have sufficient policy buffers, with which they can support growth and stabilize the Chinese economy, including scope to expand the use of monetary policy; a large household savings buffer; relatively low fiscal deficit; mostly domestic denominated debt; and large foreign exchange reserves of around 3.2 trillion U.S. dollars," he said.
The relationship the Australian economy has with that of China is not one-dimensional, Morrison explained.
"Certainly we have benefited greatly from the resources boom that we have had and what has been here with the production side of economy that is going into the consumption phase now," he said.
Morrison expects that over the long-term, China will rebalance away from the investment-led model that has underpinned its growth for decades toward one more focused on consumption-led growth.
"For a country that has been known as the 'world's factory,' the services sector now contributes over 50 percent of its GDP," he said.
"China has more room for its consumption to grow than just about any country in history. Household consumption contributed just 38.5 percent of GDP in 2015 to 56 percent in Australia and nearly 70 percent in the United States," he added.
"This means although we are seeing weakening signs in the traditional sources of China's growth, such as heavy industries like steel manufacturing, over the long-term, the rise of consumption within the Chinese economy should continue to support its economic development."
China announced a number of market-oriented reforms in 2013, which were reiterated in October 2015.
"These reforms (include) a path of higher quality growth, including through innovation, which is at the core China's growth for the next five years and is expected to drive productivity gains," Morrison said.
"The Central Economic Work Conference, in December 2015, also announced a series of necessary 'supply-side reforms,' such as tax cuts, reducing industrial capacity and halting lending to so-called 'zombie firms.'"
Australia has the highest proportion of its exports going to China of any advanced economy, Morrison added.
"China accounted for around 32 percent of our total merchandise exports in 2014-15, up from around 10 percent in 2004-05," he said.
Morrison also noted the transition occurring in the Chinese economy is also creating new opportunities for the Australian economy.
"China is already our largest destination for services exports, having increased from around 3 percent of our services exports in 2000-01 around 14 percent in 2014-15."
