Financial regulators flag China slowdown risks

The news: Australia's financial authorities have warned a sharper economic slowdown in China would be reflected in trade channels and risk-off global market conditions. In its quarterly statement, the Council of Financial Regulators — which includes APRA, ASIC, the RBA and Treasury — also said rapid increases in inflation and interest rates in recent years had exposed vulnerabilities in parts of the global financial system that would require intervention from authorities.

The context: China is the biggest importer of Australian goods, including iron ore, coal and food. The recent rally in commodity prices helped secure Australia's first budget surplus in 15 years, but the positive numbers could be short-lived if China's economy continues to slump under weaker domestic demand and a liquidity crisis in its property sector, Bloomberg reports.

What they said: "In advanced economies, the sharp increase in inflation and interest rates over the past couple of years has put pressure on household and business finances. It has also exposed some vulnerabilities in parts of the global financial system, requiring intervention by authorities," the CFR said in a joint statement.