13th July 2012
China's second-quarter gross domestic product (GDP) slowed to 7.6 percent on a year-over-year basis. That's down from 8.1% in the first three months of this year and its lowest level since the beginning of 2009.
According to a government spokesman, the share of China's growth that came from consumption rose in the first half of the year, suggesting progress in efforts to better balance the economy. Consumption contributed 57.7% of GDP growth, up from 47.5% in the first half 2011. However, the share from investment -which includes spending on big-ticket infrastructure and property projects -came in at 49.4%, down from 53.2% in the same period in 2011. Fading export growth was also a drag on output, subtracting 7.1%.
Josh Chin of China Real Time Report, a Wall Street Journal bog, put together a list of what several economists said about China's GDP number:
The continued falls in GDP and [industrial output] growth are likely to keep policy makers on their toes. We continue to expect policy loosening to become more visible, especially in light of the expected further softening of inflation and exports growth. – Yu Song, Goldman Sachs
This is a less vicious downslide compared with the global financial crisis if measured by peak-to-trough deceleration, but nearly as bad as in the  Asian financial crisis…Speed is essential for China, an economy which is basically built based on the discount-store model of high turnover and low margin… Before China makes a successful transition to a luxury-store model of low turnover and high margin, proper growth is still critical, and 7.5% growth is a luxury which China cannot afford to have yet… – Todd Lee, Xianfang Ren and Alistair Thornton, HIS Global Insight
The deceleration in economic growth was broadly expected, following the release of several indicators in recent months that painted a sluggish outlook for the quarter… In the current environment, investment and real estate-related industries have borne the brunt of the slowdown, as evidenced by the pronounced decline in earnings in the capital goods sector… – Jing Ulrich, J.P. Morgan
Though China's GDP grew at its slowest pace in three years in the second quarter, according to CNBC's John Chua, other less-cited indicators are already signaling that the world's second-largest economy may be starting to turn around.
"For example, the MNI China Business Sentiment, a private sector survey of businesses in 32 cities, showed an improvement in its final reading on June 29, compared to the flash estimate released two weeks earlier. The final reading was 53.21 versus an initial reading of 51.92.
"At the same time, new bank loan since June rose 16% to 919.8 billion yuan (USD 144.3 billion) from May's 793 billion yuan (USD 124.4 billion) and April's 682 billion yuan (USD 107 billion)……. in a sign government efforts to spur the country's slowing economy may be working.
"Other indicators are showing an uptick in economic activity in China. Power output, an alternative gauge of industrial activity, rose in May, according to the latest available data from China Electricity Council. The country generated 389.8 billion kilowatt hours (kWh) of electricity in May, up 2.7% over the previous year. That compares to growth in electricity generation of just 0.7% in April."
Furthermore, in an op-ed piece in the New York Times, Steven Rattner, a longtime Wall Street executive (who just returned from China) writes: "On balance, the people I met were firmly optimistic that the fundamental ‘urge to surge' remained. If anything, the intervening decline in the Chinese stock market had made them more enthusiastic about investing."
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