China’s economic miracle may be over
By Dan Weil, Moneynews
News that Chinese economic growth slid to 7.7 percent in the first quarter from 7.9 percent a quarter earlier may be a sign that the nation’s days of economic glory are over.
Many industries are beginning to sag after 30 years of economic growth averaging about 10 percent, The Wall Street Journal reports.
Retail sales growth slowed to 12.6 percent in March year-on-year from a 15.2 percent pace in December. Industrial production growth also dipped last month.
While China’s growth still remains the envy of the world, it has fallen almost 50 percent from its 2007 peak of 14.2 percent.
Foreign demand for Chinese goods and what was once exploding investment at home have both fallen. Some experts are worried that China is doing too much lending, generating the risk of a serious credit bubble, according to The Journal.
The slump in first-quarter growth came at the same time as record lending by financial firms — 6.1 trillion yuan (about $1 trillion). That combination suggests new money is producing less economic benefit.
Property, infrastructure and factory investments are providing smaller returns. Meanwhile, government agencies are cash-strapped after major spending programs on new offices, train stations and other projects, The Journal reports.
News of the economic slowdown has hit investors hard.
“The disappointing data show the recovery is much weaker and bumpier than expected, dragged down by soft domestic demand,” Zhu Haibin, chief China economist at JPMorgan Chase, tells Bloomberg.
Weakness in industrial production led to the disappointing gross domestic product (GDP) data, Tim Condon, head of Asian economic research at ING, tells Reuters.
“Based on this, the consensus forecasts for GDP are going to be headed lower, and we’ll certainly be looking at ours,” he notes.
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