The brakes are starting to bite on China’s runaway economic growth that pulled the nation through the recession that has hit many other world economies so hard in recent years.
Last year, China’s GDP slowed to 7.8% growth – the worst figures this century.
Now, two successive quarters have seen those figures slip to 7.7% in the first three months of 2013 and 7.5% in the second quarter of the year.
The trend is for economic growth to decline in the nation which has stood out as an industrial powerhouse for so long.
Growth has slumped for 15 months in a row, much in line with expectations, as the government has tightened lending.
Modest target
The growth target for this year is a modest 7.5% – a massive figure for many European nations and the US, but decidedly average for one of the BRICs economies (Brazil, Russia, India, China)
The Chinese government has long looked after number one and disregarded the economic problems of the rest of the world, but other governments are concerned that if growth subsides in China, it could have a knock-on effect around the world.
Growth means jobs and rising wages in China – and that means customers have money in their pockets to buy the goods of exporters around the globe.
Reining in growth and credit means those customers have less cash to spend, which decreases demand for exporters.
In turn, that means less growth and fewer jobs for those companies.
Change of government
An unknown for the rest of the world is China has just seen a change of government. Although this generally means business as usual, many financial analysts consider the government has to take some action to maintain growth or the 7.5% target will be missed.
“They have to do something to save face so early on in their role as the new government,” said Dariusz Kowalczyk of Credit Agricole.
However, the Chinese government seems unperturbed by the disappointing economic performance.
“We face some problems, but the indicators are broadly what we expected,” said a spokesman for the National Bureau of Statistics.
“The government will introduce some new measures to take the heat out of property prices and rules to crack down on corruption. The problems are compounded by the ending of stimulus policies that will hold back growth, although the economy will pick up again after a short while.”
