Chinese Growth Misses Expectations

The world’s second largest economy produces growth figures that would be the envy of any other economy, but the growth seen in the first 3 months of 2013 has come in below most analysts’ predictions. It had been anticipated that the annualised Q1 growth figure would come in at the 8% mark, but it undershot this level of performance; coming in at 7.7%. The Q4 2012 reading was 7.9%, so this has led to inevitable fears that the Chinese economy is “cooling”. Indeed, growth in 2012 came in at a 13 year low.

China’s growth is dependent on exports to the rest of the world and demand in global markets has continued to be weak. On-going concerns in the Eurozone about the sovereign debt crisis have been kept alive by the Cyprus problem and difficulties in the Slovenian banking system; an indecisive election in Italy and continuing nervousness about the Greek situation. Confidence in the American economy has been hit by the “Fiscal Cliff” and “Sequester” problems; Japan-Sino relations are strained by a territorial dispute and Japan has its own economic woes.

China’s industrial output grew by 8.9%, but this was also weaker than the anticipated level of 10%. Fixed asset investment was also marginally weaker than expected, coming in at 20.9% rather than the >21% hoped for.

Global partners are hoping that China will do more to stimulate domestic demand – it is the most populace nation on Earth – in the hope that this will boost China’s demand for imported goods and services. China faces difficult challenges with its experimentation with capitalism since it has allowed certain segments of society to get very rich whilst producing little benefit to average comrades; particularly in rural areas. Social unrest remains a big concern for Chinese authorities who need to ensure that more benefits trickle down to the people.