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A severe China slowdown would hit Australia hard, says Moody's - but it is not forecasting the worst.

AS THE world braces for the impact of a slowing Chinese economy, Australian companies are cashed up and well placed to weather any storm.

According to Moody's Investors Service, the companies it covers have more cash and less debt than before the global financial crisis, and so are in a stronger position to handle a slowdown in Australia's most important economic partner.

China's National Bureau of Statistics reported yesterday that gross domestic product was up by 8.1 per cent in the March quarter, the slowest since the second quarter of 2009.

Output from the country's factories and workshops rose 11.6 per cent in the quarter, down from 15.7 per cent a year earlier.

That figure is likely to fuel concerns about China's vast manufacturing sector, which has been hurt by falling demand for Chinese products in crisis-hit Europe and weaker domestic demand.

Moody's this week released a report titled Stress-Testing China's Growth: Impact of a Hard Landing on Australia's Corporate Sector.

It says Australia's mining and airlines industries would be the hardest hit by a slowdown in China. Moody's predicts the price for two of Australia's largest revenue earners - iron ore and coal - could drop by 40 per cent.

Price falls on that scale would raise concerns for miners such as BHP Billiton, Rio Tinto and Fortescue, which are undergoing large expansion programs.

Moody's sees engineering, oil and gas and airports as being moderately exposed in the event of hard landing in China and believes no sector can really escape from a China-induced slowdown as the world's second-largest economy affects every Australian industry.

Under a worst-case scenario of China's annual growth dropping to

5 per cent, Australia's annual GDP growth could be halved - to between 1 and 2 per cent.

Maurice O'Connell, a vice-president at Moody's, said ''a hard landing in China would weigh heavily on Australia's economic fundamentals''.

''A severe slowdown in China would have a direct detrimental impact on Australia in terms of trade,'' he said in the report. ''However, a severe slowdown in China is not part of our central macro-economic scenario.''