Join        Login             Stock Quote

Chinese Weaker Economy Growth Raises Concern About Global Economic Strength

 April 13, 2012 10:10 AM

Chinese gross domestic product witnessed 8.1 growth during the first quarter, but it came lower than predicted. Yet it is above the country's stated target of achieving yearly growth to limit its dependence on external factors. Still, weak economic activity in the second largest economy raises a question about the strength of economic resilience following the European debt crisis that has been hurting sentiments.

China's economy advanced 8.1 percent in the first quarter on the year-on-year basis, a data from National Bureau of Statistics indicate. This is lower than the growth achieved in the fourth quarter of 2011. The latest quarterly GDP is the weakest in the last eleven quarters and came in below economists predictions of 8.4 percent upside. On a quarter-on-quarter basis, economy has advanced 1.8 percent, according to the statistical office.

[Related -3 Stocks With 100% Upside]

Exports witnessed slower activities due to worldwide economic uncertainty amidst European debt crisis. Exports accounts for more than 30 percent of China's GDP growth and slower activity would no doubt impact its economy. This is the precise reason why its Premier had reduced the nation's economic target to 7.5 percent from over 8 percent so as to cut down its dependence on external factors and instead stimulate domestic demand.

Only yesterday, World Bank has reduced its economy forecast for China to 8.2 percent from 8.4 percent for 2012 citing a marked slow down in investment growth thus hurting consumption and weak demand from external factors. Asian Development Bank had also slashed its outlook for Chinese economy to 8.5 percent from 9.1 percent. Other global lending agencies have also cut down their GDP projection for China for 2012. Yet, China's Information Center believes that its economy can achieve 8.5 percent growth in 2012 though temporary slowdown could be witnessed during the first two quarters.

[Related -U.S. Exchanges May Wish They Had Gotten a Snow Day Closure!]

While the first quarter GDP might have come below economists expectations, it is well above the nation's target for a 7.5 percent growth. But to achieve this sustained growth is necessary. What is causing concern to economists is that quarter-over-quarter GDP upside is slowing to the weakest. Both the fourth quarter as well as the first quarter economy was considered weakest and if the trend continues, there is every possibility that GDP growth for the second quarter may drop below 8 percent. For a long time, China has been delivering GDP growth of around 10 percent and the latest is certainly a disappointing one.

However, economists and experts are pushing for relaxing of monetary policy to spur growth in the wake of global slow down. Loosening of monetary policy is necessary to stimulate domestic demand.

Earlier this week, two economic reports restricted policy makers to loosen its money policy to spur growth. First it was inflation that came in more than estimated and the second widening of trade surplus for March. These two positive factors nearly shut the doors for any possible relaxation on monetary policy. The latest GDP numbers may force policy makers to have a rethink on current monetary policy. China has assumed greater importance in world economic map for its size and opportunities for growth. Therefore, its sustained growth is vital for any strong global economic activities.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article image3 Stocks With 100% Upside

Biotech stocks had a banner year in 2014. Agios Pharmaceuticals, Inc. (Nasdaq: AGIO), Avanir read on...

article imageUpside Risks Are the Riskiest

For long-term investors, upside market risk has forever been the most dangerous read on...

article imageGrexit: It Is Not The Debt, It Is The Future.

A follow up to my previous post now that we know that the Syriza party has won the election. What comes read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.