WHEN WE talk about China, and particularly its extraordinary economy, expressions of disappointment at underperformance are of course relative. Perspective helps. Market concerns on Friday that its manufacturing sector had grown by “only” 9.2 per cent from a year earlier, “far below” the 9.8 per cent that analysts expected, the weakest in more than three years, were written up as symptomatic of the “stumbling” Chinese economy.
Questions are being asked about the strength of what was expected to be the start of a shallow rebound in the economy after growth had slipped for six successive quarters – the data prompted Barclays Capital to cut its full-year China growth forecast to 7.9 per cent from 8.1 per cent. Bad news for China, and for the depressed world economy that is depending on it to boost global demand.
Would that we had China’s problems . . . But the figures reflect genuine problems, if of a different character to our own, and they are of concern to us. Retail sales growth also dipped from 13.7 to 13.2 per cent, while analysts complained at fixed asset investment growth of “only” 20.4 per cent in the first seven months of 2012.
China’s July trade figures, also out on Friday, showed exports at a near standstill, up just 1 per cent from a year earlier and the weakest since November 2009. Import growth was also “anaemic” at 4.7 per cent, according to the Wall Street Journal. Exports to the EU in July were down 16 per cent, to Japan down 1 per cent, those to the US, flat. China would face a challenge in meeting its target of 10 per cent growth in trade in the second half of the year, vice commerce minister Gao Hucheng told reporters. And slowing Chinese demand has resulted in tumbling benchmark prices for steel, iron ore and coal.
China’s problems are a result mainly of the problem we are all hoping its economy will help resolve – weak overseas demand for its exports, not least from the debt- ridden EU and the sluggish US – and in part from the lingering effect of Beijing’s own efforts last year to hold back in inflation (successfully, the latest figures show – 1.8 per cent on the year).
The hope is that the government may now be stung into further measures, “policy easing”, to boost the economy. That could include, analysts suggest, measures to free up more bank lending, such as reducing the amount banks are required to hold as reserves, investment drives and, possibly, another rate cut in the third quarter. What one commentator calls, in hope, a “stimulus punch” rather than a stimulus push.