A prominent Australian investor says a slowing Chinese economy is one of the challenges facing the global economy and Australia.

Billionaire Kerr Neilson runs Platinum Asset Management in Sydney, which invests in international shares, not Australian stocks.

Mr Neilson said he was not unusually worried about China and noted that the world economy faced several challenges.

‘In China, the country is slowing down quite quickly and they will have rising bad debts, nonperforming assets on their banking,’ he said in an interview with the ABC on the sidelines of an investor presentation to another Sydney‐based fund manager Park Street Group.

Mr Neilson travels frequently overseas, including to China and India. He said the Chinese economy is likely to grow much more slowly than the government’s target, and official statistics bureau result, of 7 per cent per annum.

‘All the indicators we look at, and I’m not talking about electricity or those old fashioned measures, but the other measures suggest that it’s growing more like 4 [per cent] or so,’ Mr Neilson said.

‘The reason the government is sticking to a high growth figure is a sort of confidence boosting measure as far as we can see and, to some extent, face saving.’

Mr Neilson thinks the volatility may continue on Chinese share markets and the government had mismanaged the situation.

He said Chinese authorities should have taken steps to reduce the amount of margin lending much sooner.

‘Where the mistake was made is to allow the amount of margin credit to be used to buy shares and the consequence of that is that it became a bit of a free for all and we had very extraordinary levels of speculation,’ Mr Neilson argued. 

‘Then, of course, we found valuations that were just crazy.’

QUESTION

What contingency plans should Australian managers have made for a slowing Chinese economy?