I am not a China expert although I constantly keep a tab on global economy, but I can surely predict China slowdown is going to be much worse than the Chinese policy makers had anticipated. The reason I am saying so is that I as an investor is not seeing a systematic multi-pronged approach by the Chinese to tackle the situation they are in. They are trying to solve the issues on daily basis being reactive to situations rather than forecasting the issues and laying down the processes and solutions much in advance. In short, Chinese policymakers are "fire-fighting".
In this regard, we may see similar knee jerk reactions, which we saw on Monday, in Chinese markets in future also. This single factor may dissuade future foreign inflows into Chinese equities and they may in all likelihood get diverted to stable markets like India.
Slowdown in China may not have that profound effect on Indian economy versus the developed economies. Just to cite, the trade of "goods" between India and US is expected to be some $67 billion in 2015, in comparison to between China and US at some $596 billion. The developed economies have more to worry about as far as their linkage with China is concerned. In the year 2013-14, the trade of "goods" between China and India was some $66 billion. And remember, India is a domestic consumption economy.
Given above the trade data and propensity of Chinese to devalue yuan to increase the competitiveness of its exports in a scenario of global slowdown, I believe the Indian Rupee will stand out on its own merits. As long as our government will keep on pursuing reforms and keep attracting not only the foreign portfolio investments but also the direct investments, the Rupee will not be that much affected by the yuan devaluation.
The last years' statistics prove that. The rupee fared much better despite a pull-out by foreign funds from the emerging markets, including India, as an interest rate hike was expected from the US Federal Reserve.The currency was stable when the US raised the benchmark interest rate and has actually strengthened against the dollar since then.
Its Asian counterparts like the Indonesian rupiah weakened by 11.30 per cent and the Thai baht depreciated 9.5 per cent against the dollar. Among the BRICS nations also the Indian currency fared well. The Brazilian real depreciated 49 per cent against the dollar while the South African rand declined 34.75 per cent.The Chinese currency fared marginally better, losing only 4.6 per cent - but keep in mind that it is not a free float.The relative stability of the rupee is attributed to the improved macro-economic conditions.
China slowdown has affected the prices of commodities - the prices have crashed, as it is the dominant global consumer of those commodities, and this again is a boon for Indian manufacturers who rely upon those commodities.
So, I believe in medium to long term woes for China are boon for India.
(The writer is an investment strategist)