China: GDP Growth Slips to 7.6%

July 13th, 2012
in econ_news

Econintersect:   In China the National Bureau of Statistics has reported that the county’s  gross domestic product (GDP) expanded 7.6 % in the second breaking-news-130pxquarter from a year earlier. That compares with growth of 8.1 % in the first quarter and means that China's economy expanded at 7.8% year-over-year in the first half year.  China’s economy is slowing down at the same time both Europe and the U.S. are having similar problems.  In fact, part of China’s slower growth may be directly attributable to the softness in other major economies.  China has had a larger than expected balance of trade surplus in the first half of the year, but a part of that has been due to imports declining faster than exports.  (See GEI News.)

Follow up:

An AP article in The Washington Post indicates that the Chinese slowdown may be over.   One thing that was cited was increased bank lending in June.   From The Washington Post:

“The Chinese economy has already bottomed out in the first two quarters,” said Xiao Li, an economist at Industrial Bank in Shanghai. “It is not certain whether or not there will be a strong upward rebound. But at least the economic growth rate will stop coming down,” Xiao said.

However, some China observers are pointing to industrial activity that appears to be egregiously wasteful, so increased bank lending in June may not necessarily be a good thing.  See articles by Craig Tindale and John Hempton.  And China economic expert Michael Pettis thinks that the country will need to get its GDP growth down to 3% soon to effect a necessary rebalancing without major economic turmoil. (GEI Analysis

In addition, both GEI and The New York Times have discussed news that indicates that China is at risk of entering a deflationary period.  In spite of the optimism of some, like Xiao Li, there are others who are not convinced that the second half of 2012 will see GDP remain at or rise above the first half growth of 7.8%.

John Lounsbury


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