This came in overnight via the FT.
China’s economy expanded 8.9 per cent in the fourth quarter of last year, extending a slowdown that began at the start of 2011 and is expected to continue into 2012.
That’s a full percentage lower than Q1 2011. So clearly the Chinese economy has slowed in reaction to both global slowing and the Chinese authorities’ attempts to cool asset and price inflation. Here’s the thing though:
The gradual slowdown led most analysts to conclude that Beijing has managed to engineer a “soft landing”, as price increases have fallen back from a peak of 6.5 per cent in July to 4.1 per cent in December.
Is that the right analysis? And why?
Many other analysts are also predicting a sharper slowdown in the coming months.
“We expect GDP growth to slow more markedly in the first quarter due to the sharp investment slowdown under way,” economists at Citi said in a note.
JPMorgan expects economic growth to slow to 7.6 per cent from a year earlier in the first quarter of 2012, driven down in part by declining exports to the EU and Japan.
But a deceleration has long been expected – the question has been whether it will be gradual or a hard landing.
Jim O’Neill is saying Chinese GDP numbers are “a blow for the hard landing guys” whereas analysts like Patrick Chovanec are taking the other side.
Based on the voting on this poll so far, I see this as a major economic issue where there is no consensus. I think the outcome will be a driving force of stock and bond market valuations globally by the second half of the year.
Source: Financial Times
P.S. – To give you a sense of how China bulls see this, the World bank says China can grow 8pc annually for two decades. Update: Also see my post from last which asks: Has Anyone Noticed The Mammoth Shifts in Chinese Economic Policy? We are now on the backside of the initial burst of Chinese economic policy changes. Now it has to be about domestic consumption.