Econintersect: In China the National Bureau of Statistics has reported that the county’s gross domestic product (GDP) expanded 7.6 % in the second 
quarter 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.)
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%.
Sources:
- China’s Q2 GPD growth slows to 7.6% (Ye Zhen, Shanghai Daily, 13 July 2012)
- China: Prices Falling Off a Cliff, Trade Balance Unexpectedly Positive (GEI News, 10 July 2012)
- China’s economic growth falls to a new 3-year low of 7.6 percent despite government stimulus (Associated Press, The Washington Post, 12 July 2012)
- Price Data Suggest Specter of Deflation in China (Keith Bradsher, The New York Times, 09 July 2012)
- China: Economic Numbers Weaken, Inflation Slows. Does Deflation Await?(GEI News, 09 June 2012)
- Could Deflation Come to China? (John Lounsbury,GEI Opinion, 11 June 2012)
- China’s Macroeconomic Miracle: Kleptocracy (John Hempton, GEI Opinion, 11 July 2012)
- China: Will a Concrete Bubble Turn into Concrete Shoes? (Craig Tindale,GEI Opinion, 05 July 2012)
- China: Financial Repression Must End (Michael Pettis, GEI Analysis, 05 July 2012)
- China: Limits to Debt Fueled Growth (Michael Pettis, GEI Analysis, 22 June 2012)
