China released economic growth numbers for the July-to-September (Q-3) period, yielding its slowest quarterly growth since the 2009 financial crisis. The country’s economy grew 6.9%, due to significant stock market volatility and “a deepening industrial rout” (nytimes.com). The recent uncertainty surrounding China’s slowing growth has battered the global equities markets and has led to investors questioning the accuracy of Chinese economic data, these fears have been furthered through “China’s botched attempts to prop up its stock market in July and the surprise move in August to devalue its currency by the most in nearly two decades” (nytimes.com).
One, direct internal cause for China’s slowing pace is the conversion of its primary growth drivers (manufacturing and housing construction) to some of the biggest drags on the economy. The country’s industrial production “rose 5.7 percent in September, near its slowest pace since the financial crisis” (nytimes.com). The Chinese government is now depending on rising consumer demand, in wake of the country’s urban development and growing middle class. While retail sales rose “10.9 percent in September,” (nytimes.com) increasing consumer spending could not offset China’s industrial slump.
Many believe that this fettered expansion will encourage China’s central bank to lower the reserve ratio and cut interest rates, an action the communist government has carried out five times since last November, in order to aid the economy. It is apparent that a significant amount of the China’s slowdown has been self-imposed over the past five years, as communist leaders work to “steer the economy to more self-sustaining growth based on domestic consumption and the service industry instead of trade and investment” (Aljazeera.com).
Global investors will be keen to observe China’s future economic growth and the forecasted numbers the communist government will release in the coming quarter in response to a slow quarter. The further decrease in the country’s expansion could have wide-spread financial implications, and equity holder will want to keep a close eye on China in the coming years.