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Finance & Economy

Business Week Reports China Economic Slowdown Despite Stimulus

Amid growing concerns that China’s growth figures may be overstated, the National Bureau of Statistics announced July 13 that gross domestic product grew 7.6 percent in the second quarter, its slowest pace in three years. A slowdown in investment, including in real estate and infrastructure, the primary driver of China’s growth in recent years, plus a still fragile global economy, are hampering efforts to finesse a soft landing in the world’s second-largest economy.

“We continue to believe that China’s economy is not doing as well as the already downbeat official figures suggest,” says Mark Williams, chief Asia economist at London-based Capital Economics in a July 13 note. “Our view is that growth may actually have been weaker still—our China Activity Proxy points to growth of around 7.0%.”

The slowdown continues despite increasingly aggressive growth-boosting measures taken by Beijing. China’s central bank cut interest rates twice in the last month-plus and has reduced bank reserve requirements three times since last November. China’s planning agency, the National Development and Reform Commission, since May has sped up approvals of infrastructure projects including steel, new airports, and water treatment facilities. “Policies to stabilise growth include promoting consumption and diversifying exports,” said Premier Wen Jiabao in Beijing on July 10, while meeting representatives from auto, trade, logistics, e-commerce, and real estate companies. “But the current priority is encouraging appropriate growth in investment.”

Along with the GDP disappointment—the sixth quarter of declining growth—sales, industry, and trade also continued to cool. Retail sales growth slowed, up 14.4 percent in the year through June, as compared with 14.5 percent growth in the first five months. Industrial production saw 10.5 percent growth through June, down from the 10.7 percent registered year-to-date through May.

And with the debt crisis in Europe, China’s biggest export market, far from resolved, China’s trade continued to show signs of weakness. Exports slowed to 11.3 percent growth in June, from 15.3 percent the previous month; overall, during the first half, China’s overseas shipments grew by only 9.2 percent, down from 24 percent in the first half of 2011. And imports saw a more dramatic drop in growth, up just 6.3 percent in June, vs. 12.7 percent in May.

Still, there have been some encouraging signs. In June new loans totalled 919.8 billion yuan ($144.3 billion), well above the 880 billion yuan median forecast in a Bloomberg survey. Also encouraging has been a pickup in property transactions. That seems to be in part due to Beijing showing more tolerance toward local efforts to boost sales, such as loosened mortgage requirements, even as Wen and others continue to insist restrictions will continue.

“The housing market is now picking up and should be less of a drag on growth in the rest of the year,” says Andrew Batson, research director at GK Dragonomics, in a July 13 note. “And money supply growth, new bank lending and new non-bank lending (aka shadow finance) all clearly accelerated in June, in a sign that monetary policy is gaining some traction.”

Article courtesy of Apprentice Millionaire Portfolio website, July 14

About jackbassteam

Jack A. Bass B.A. LL.B is one of North America's foremost tax strategists working to help clients achieve a low tax base. As an economist and management consultant ( he forecast the dramatic rise in the price of gold ( from under $900) and then the slide fro $1800. He forecast the fall in natural gas prices from $12 to below $4.00 and oil from $100 In 2009 he forecast an astounding rise in the stock market even as he warned of the fallout from Obama Economics. "Obama Economics threaten all markets as the influence of runaway printing presses will turn on its creators. Jacks education includes degrees in Economics and Law. He has completed (graduating at the top of his class) the securities course as part of a large American retail broker. web site Apprentice Millionaire Portfolio is available from as is The Gold Investors Handbook .



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