Tuesday, July 29, 2014   

Economists see distress signs in China slowdown, predict further deceleration
(07-15 11:53)

China's leaders face new pressure to stimulate a slowing economy after growth decelerated for a second consecutive quarter, hurt by weak trade and efforts to cool a credit boom.
The world's second-largest economy expanded 7.5 percent over a year earlier in the three months ending in June, down from the previous quarter's 7.7 percent, data showed today. Growth in factory output, investment and other indicators weakened.
The fifth straight quarter of growth below 8 percent is “a clear sign of distress,'' said IHS Global Insight analyst Xianfang Ren in a report. With investment weak, she said growth might be “at risk of stalling.''
Analysts said growth could fall further in the current quarter, AP reports.
Chinese leaders are likely to respond by launching new stimulus to make sure growth hits their target for this year of 7.5 percent, said Credit Agricole CIB economist Dariusz Kowalczyk. He said that might include weakening the Chinese currency to spur exports or pumping money into the economy through higher public works spending.
“We will see some targeted measures to stimulate growth,'' said Kowalczyk. “They have to do something. Otherwise they will miss their target. And they cannot afford that, because this is their first year in power.''
Despite the slowdown, communist leaders have expressed determination to stick to plans aimed at nurturing slower and more sustainable growth.
“Major indicators are within our targeted range but we face a complex situation,'' said a spokesman for the statistics bureau, Sheng Laiyuan, at a news conference.
Sheng said the government's goal is to “promote restructuring'' and make more of the “driving force'' of the market.
Growth in factory output slowed to 9.3 percent for the first half of the year, down 0.2 percentage point from the first quarter's rate, the statistics bureau reported. Growth in investment in factories and other fixed assets in the first half declined by 0.8 percentage points to 20.1 percent. Retail sales in the first half rose 12.7 percent but that was down 1.7 percentage points from a year earlier.
“Further deceleration is possible if reforms and stimulus measures are delayed,'' said Alaistair Chan of Moody's Analytics in a report.
China’s 7.5 percent growth target for the year is stronger than forecasts for the United States, Europe and Japan, but China's weakest performance since 1991. Finance Minister Lou Jiwei appeared to try to lower expectations last week when he told reporters in Washington that growth as low as 6.5 percent would be tolerable.


   
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