Things may be looking up for the Chinese economy. China’s growth levels increased to 7.8% in the third quarter, easing fears of a slowdown for the world’s second largest economy. Causes may be government stimulus and increase in new lending. 7.8% tops the Chinese growth target, which hasn’t missed since 1998. However, the targets may have been kept superficially low to avoid the image of a brewing crisis. Additionally, new plans for the country’s economic focus could damage this record of hitting targets. According to the Wall Street Journal, China is looking to shift to a greater dependence on domestic production and lean away from reliance on exports and investments in infrastructure, etc. In the short-term, this could lower growth rates.
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http://online.wsj.com/news/articles/SB10001424052702304864504579142311568784346?KEYWORDS=china
Although growth in China did rebound from 7.5 percent in the 2Q13 to 7.8 percent during 3Q13, the data is not sufficient to dissuade many analysts from fearing a continued slowdown in the Chinese growth rate into the low seven percent range over the coming quarters. The quarter showed double digit growth in retail sales, industrial output, and fixed asset investment, remaining robust relative to global growth, yet the rate at which these indicators have been expanding has been consistently slowing. The consistent trend lower is certainly something to consider, along with the tepid expansion that the composite PMI readings indicate. Still, the PMI readings indicate strong new orders and business activity expectations, which hint at the potential for improved future growth. Nonetheless, inflation has been ticking mildly higher while home prices have been escalating, incentivizing the People’s Bank of China to tighten monetary policy to alleviate pricing pressure, which would be another headwind to the Chinese economy. Overall, China is still realizing robust growth, but unless there is some external catalyst, growth expectations will remain right around mid 7 percent, in line with government guidance.
Works Cited:
http://www.marketwatch.com/story/chinas-growth-picks-up-but-slowdown-likely-ahead-2013-10-17?link=MW_home_latest_news
http://www.businessinsider.com/september-official-china-pmi-2013-9
I think the real question should be over the reliability, accuracy, and veracity of Chinese economic data. Various sources I have seen have suggested that there may be some inaccuracies and misrepresentations. I find it hard to believe that Chinese growth is so consistent, right around 8%, when in the rest of the world there is a little more variety over time on a percent change basis. I don’t necessarily have an academic argument to back this up, but it seems a little odd to me. Whether higher or lower, the variations between provincial and national GDP figures, as well as the way real estate growth is accounted for lead me to believe that things may not be quite as they seem. Linda Yueh, Chief Business Correspondent in China for the BBC, has published 2 articles suggesting the same.
On the BBC:
http://www.bbc.co.uk/news/business-24577043
http://www.bbc.co.uk/news/business-23982997
South China Morning Post:
http://www.scmp.com/business/article/1296018/official-manipulation-adds-10-cent-chinas-gdp