GLOBAL - The drivers of BRIC economic growth in the last decade will hold back growth in the next - and China's property sector could be among the first to suffer, according to reports published this week.
Legal & General Investment Management (LGIM) claimed the accelerated capital accumulation - savings - that drove economic growth in the last decade is unlikely to continue as the working age population slows sharply in China and falls in Russia.
According to emerging markets strategist Brian Coulton, although BRIC economic growth will still outpace that of their Western counterparts, demographic trends will have a "powerful dampening impact" on Chinese and Russian growth in the next decade.
Meanwhile, while the report points to doubts over the willingness of international investors to fund ongoing increases in the investment share in India, in China, the government is targeting a shift away from investment towards consumption.
China and India "already appear to be suffering from a decline in the efficiency of investment following a sharp credit expansion in recent years", said the report.
On the basis of a current investment-to-GDP ratio described by the report as "absurd", it forecasts that the rate of investment growth would need to halve to be "sensible".
"Over the past decade, surging investment meant the BRICs' most powerful impact was on global capital goods and commodity markets," the report said. "Over the next 10 years, it is the impact of the BRIC consumer that will be felt most strongly."
A recent research note published by ratings agency Moody's claims property will be one of the Chinese sectors most exposed to adverse policy tightening, cyclicality and excess capacity.
The report claims Chinese property firms will be among those hit by a moderately negative ratings trend as a result of slower global growth.
Forecasting overall restrained prospects for corporate issuers, it also identified among investors' concerns corporate governance and unfavourable lending conditions.