China's central bank has cut the country's official cash rate for the second time in three months - a move which highlights concern about the economic slowdown of New Zealand's largest trading partner.
Over the weekend The People's Bank of China announced a rate cut on one-year loans by commercial banks of 0.25 per cent to 5.35 per cent. The interest rate paid on a one-year deposit was also lowered by 0.25 to 2.50 per cent.
Market watchers in China are predicting more cuts to come as the People's Bank takes advantage of lower inflation to administer some stimulation to the economy by way of lower lending rates.
It is no surprise that Chinese economic growth is slowing. The transition to more moderate domestic-led growth is an official Government policy. Having targeted a growth rate of 7.5 per cent in 2014 - it eventually came in at 7.4 per cent, many now expect the Chinese leadership will set an official GDP growth target of 7 per cent for 2015.
But managing that slowdown and keeping it at a measured pace won't be easy and may require more stimulatory measures.
House prices in China's major cities fell by about 4 per cent in February. If that trend were to accelerate it might seriously dent the consumer confidence of China's enormous middle class.
Every new phase for the Chinese economy is an unprecedented one. Picking how new conditions will flow through to New Zealand is very difficult. But watching developments closely is very important.
It's plausible that falling property prices in China may prompt investors there to look further afield - making investment into our market even more attractive.
If that was focused on our existing residential market, it could push prices even higher. But if Chinese capital were channelled into commercial development and new home building, it might be just what we need. Someone is going to have to fund the vast Auckland building boom the Government is promising.
It's plausible that falling property prices in China may prompt investors there to look further afield - making investment into our market even more attractive.
The property slowdown will certainly curb Chinese construction and looks likely to put pressure on hard commodities. Steel, iron ore and coal look likely to be the worst effected. That doesn't sound like great news for Australia and by association could be a negative for New Zealand.
But there is considerably more optimism around food commodities. The OECD's Food and Agriculture Organisation estimates that Chinese milk production will continue to grow more slowly than consumption. Most of the production growth will be in fresh milk and imports are projected to keep rising with milk powders accounting for the bulk of the rise.
That's a good trend but it relies heavily on continued stability for middle class consumers. As we know from experience, their confidence is closely linked to property prices.
If the fall in Chinese property prices were to accelerate radically we could expect to see an official response. The Chinese Government has enormous stimulatory firepower, both in terms of wealth reserves and the political clout to deploy them.
That too will have a ripple effect on the global economy.