China GDP Grows Even Slower

china-gdp-growth-annual

China’s gross domestic product growth in the first quarter decreased to 7.4% that is the slowest level in 18 months. The continuous economic slowdown of the world’s second-largest economy really makes people worry as China plays a more and more important role in the global market.

Since about three years ago the government started to emphasis the development of financial market and innovation of technology instead of relying on export and governmental investment. Therefore, some economists treated the slowdown of China’s economy as an inevitable sign during the transition. “It’s a move in the right direction,” said ING economist Tim Condon. He thinks 2013 was not a good year for restructuring in China, but the situation could be better in2014. However, China’s GDP growth has fallen to 7.4%, compared with the double-digit growth few years ago. Should we worry about the further slowdown of China’s economy?

There are signs of slowdown in many areas. Due to the control over housing market, the fixed-asset investment that covers machinery, land and buildings slightly increased to 17.6% in the first quarter, which is less than the 17.9% expectation. The growth of retail sales struggled to keep the same level as before. However, the anti-extravagance campaign introduced by the government could seriously affected officials’ consumption of luxury goods such as cars, yachts and tourism. Moreover, bad news also came from its financial market. The local government debt level has become an increasing danger. Defaults also happened on trust loans and corporate bonds since the start of 2014. As more and more problems exposed, Chinese government should really take some measure to stop the trend of slowdown before it is too late.

Premier Li Keqiang said that China needs to keep economy growing at a speed of 7.2% in order to provide enough employment. Before the figure reaches the bottom line, the government announced a plan of economic stimulus in April. It includes the construction of railroad and rural area.  Other measures such as tax reduce and governmental investment in the market could also be expected as the following steps of the government. On the other hand, the market gave a positive response to the measures of government. The stock markets in Shanghai and Hong Kong went up after the announcement.

Therefore, the economics reform could no longer be an excuse for the slowdown as the GDP growth has almost reached the bottom line. It is time for the government to take actions and recover it to a safe level.

2 thoughts on “China GDP Grows Even Slower

  1. lippmanb

    I wrote about the same thing.I agreed that the government should take action to help fight this decrease in output.

  2. wyna

    Although China’s GDP is still dropping by 6 consecutive quarters, as long as it beats the market expectation, it will enjoy additional surprise growth. This is especially in line with many things we are learning about in class past few weeks like rational expectation, efficient market theory and random walk. China’s GDP has been consistently beating its expectation past decade–including the past 6 quarters. Besides 7.6% is still incredibly high rate, doubling the size of the economy in 10 years.

Comments are closed.