Is the Chinese economy for turning? The country has reported a ‘shock’ GDP growth of only 7.7 per cent for the fourth quarter.
Yes, I know — if only Britain could get such shocks. But economists were expecting China to post an 8 per cent climb and, along with Fitch’s recent rating downgrade and today’s Moody’s lowering of the nation’s credit outlook, it’s hard evidence the world’s second largest economy is slowing. Analysts are falling over each other to slash their 2013 predictions.
It’s obvious how much international markets have been relying on the Chinese engine to haul the global economy out of the mire. The GDP figures sent markets tumbling – from crude oil to metals, from the euro and sterling to Prada shares. Gold is in meltdown.
It all comes at a bad time, what with recent economic data from the US not being reassuring, and the eurozone hobbling from crisis to crisis. But perhaps its growth slowdown may give Beijing pause for thought — and force it to focus on various flash points in its economy.
There’s its escalating debts and the growing crisis of shadow banking, just to name two huge problems — these triggered the Fitch downgrade in the first place. If China doesn’t fix these, its financial sector may well suffer the convulsions that America’s did in 2007, and the world economy will suffer with it.
The GDP surprise was also caused by a slowdown in the retail sector. On the face of it, it’s not at all what new leader Xi Jinping is aiming for — he wants China to cease being the world’s factory and rely instead on consumption. But part of the retail setback is due to a government campaign to end conspicuous consumption among officials, which has affected everything from luxury handbags to shark’s fin soup.
This could be a positive for the global economy in the long run. China needs to wake up to the fragilities of its economic miracle. If nothing else, it’s good news for sharks.Tags: China, Economics