Friday 19 January 2018

China sees economic growth slowdown

China's economy expanded 7.5 per cent over a year earlier in the three months ending in June
China's economy expanded 7.5 per cent over a year earlier in the three months ending in June

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% over a year earlier in the three months ending in June, down from the previous quarter's 7.7%, data showed. Growth in factory output, investment and other indicators weakened.

The fifth straight quarter of growth below 8% is "a clear sign of distress", said IHS Global Insight analyst Xianfang Ren. With investment weak, she said growth might be "at risk of stalling".

Analysts said growth could fall further in the current quarter, adding to pressure on communist leaders who took power last year and are trying to shift China from reliance on exports and investment to slower, more sustainable growth based on domestic consumption.

Chinese leaders are likely to respond by launching new stimulus to make sure growth hits their target for this year of 7.5%, 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 seem some targeted measures to stimulate growth," said Mr 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."

A decline in Chinese economic activity could have global repercussions, denting revenues for suppliers of commodities and industrial components such as Australia, Brazil and south-east Asia. Lower Chinese demand has already depressed prices for iron ore and other raw materials.

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. He said the government's goal is to "promote restructuring" and make more of the "driving force" of the market.

Press Association

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