Observers Say China's Economic Growth Slows to Steadier Pace

 

Market analysts including the Managing Director of China Galaxy Securities, Zuo Xiaolei, are seemingly not too worried about the current slowdown.

 

"A growth rate which has been fluctuating around 7.5 percent has not caused huge rates of unemployment. So we believe that a margin of fluctuation centered around 7.5 percent is part of our potential growth level. So we should not worry because of minor fluctuations. We need to understand better China's current stage of economic changes and accept the potential growth level of China, which will remain at a single digit level."

 

Observers are suggesting Monday's economic data is a healthy reminder that the days of double-digit growth fueled by strong exports and lavish investment are over.

 

Zuo Xiaolei notes the slowdown comes as the Chinese government moves to try to create a more sustainable growth model that relies more on domestic consumption.

 

"China's rapid growth over the last 30 years was based on a major factor, given by advantageous conditions of labour forces, but this has now changed. So it is normal that our potential growth has changed accordingly. I think China has entered a new economic phase, and the speed of growth of our economy will also change accordingly."

 

Some have suggested the latest figures might be the catalyst for the government to bring in a series of stimulus measures to try to revive higher growth.

 

However, Nomura chief economist Rob Subbaraman suggests the authorities should be cautious about any "knee-jerk" reactions.

 

"I think the implication for policy near term is we still think it is best to keep the broad policy measures on the tight side. The biggest danger we see for China is, just because growth is starting to ease off, they suddenly relax all the monetary tightening measures, and we start to see debt building up again, the property market taking off again, and then it is very dangerous we think, because already the financial cycle is looking pretty excessive, and that can lead to a very severe recession if you have a crisis there."

 

The 2nd quarter slowdown has been largely brought on by the continued problems in the European economy, which has led to a slowdown in Chinese export demand.

 

It's expected a revival of fortunes in Europe and the United States should help ease pressure on Chinese exporters.