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Tags: China | growth | economy | instability

Chinese Economy Facing Instability as Growth Cools, DRC Says

Tuesday, 23 July 2013 10:42 AM EDT

China’s economy may be facing a period of instability and imbalance as it transitions from high-speed growth, a state researcher said.

“Growth inertia should not be underestimated, as new growth engines and patterns have not been formed,” researcher Yu Bin said in a report by China’s Development Research Center released today in London. “Market expectations are unstable, downward pressure has increased, and existing and new structural mismatches exist. The economy has become unstable and uncertain like never before.”

China’s growth slowed for a second straight quarter to 7.5 percent in the April-June period, increasing the risk that Premier Li Keqiang will miss a full-year target for the same pace. Reports in Chinese media indicating that Li will act to support expansion if needed helped send the Shanghai Composite Index up 2 percent today.

Yu said that if China can maintain “an appropriate macroeconomic environment,” start suitable reforms and control risks, “the growth rate for 2013 can approach 7.5 percent.”

In a question-and-answer session after presenting the report, Yu said that while the global economy may strengthen in the second half of the year, “that doesn’t mean an improvement in Chinese exports.”

“Chinese exports are under pressure,” he said.

‘Bottom Line’

Expansion below 7 percent won’t be tolerated because China needs to achieve a moderately prosperous society by 2020, according to a commentary published July 21 by the official Xinhua News Agency. Li said at a recent meeting with economists that 7 percent is the “bottom line” and the nation can’t allow growth below that, the Beijing News reported today.

HSBC Holdings Plc and Markit Economics will tomorrow release preliminary results of a manufacturing Purchasing Managers’ Index for July, giving one of the first indications of the economy’s performance in the third quarter.

China this month eliminated the lower limit on lending rates offered by the nation’s financial institutions as economic growth slows and authorities expand the role of markets. The central bank acknowledged that it was a limited step and said that freeing up deposit rates would be more important.

Exports unexpectedly fell 3.1 percent in June from a year earlier, the most since the global financial crisis. Industrial production rose a less-than-forecast 8.9 percent and factory- gate prices declined for a 16th month.

China’s gross domestic product rose 7.5 percent in April to June from a year earlier, down from 7.7 percent in the first quarter. Growth was the slowest in three quarters and extended the longest streak of sub-8 percent expansion in at least two decades.

© Copyright 2024 Bloomberg News. All rights reserved.


InvestingAnalysis
China's economy may be facing a period of instability and imbalance as it transitions from high-speed growth, a state researcher said.
China,growth,economy,instability
418
2013-42-23
Tuesday, 23 July 2013 10:42 AM
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