Advertisement

China postpones its hard landing

Fears of a downturn in the Chinese economy have been put off - at least for now.

Signs of mounting strength in China's economy cheered global markets this week. Exports rose by 7.2% year-on-year in August, helped by stronger growth abroad. August's trade surplus was the highest for that month since 2008. The annual rate of consumer price inflation edged down by 0.1% to 2.6%. Producer price deflation eased to -1.6% on an annual basis.

Advertisement - Article continues below

Industrial production accelerated by 10.4% year-on-year, the fastest annual pace since March 2012. Retail sales growth ticked up to 13.4%. Forecasters now reckon the government will have little trouble meeting its 7.5% GDP growth target for this year.

What the commentators said

The main worry about China, continued Weisenthal, is that "tons of investment-led growth" has led to widespread overcapacity, lots of unused infrastructure, and a dire need to let demand catch up with supply; hence all the talk about shifting growth towards consumption rather than investment. But the latest data suggest "we're back to investment-led growth, and adding more infrastructure where it is unneeded".

A significant acceleration in infrastructure investment has been "the major push" of late, as Socit Gnrale pointed out, while Capital Economics added that the most rapid gains in output last month came from state-owned firms. Overall credit in the economy is still growing at 20% year-on-year, said the consultancy. So "the omens for the short term are good". But the economy's structural problems are getting worse as this rebound has "strong echoes of 2009. The economy is once again being propelled, unsustainably, by state-led investment."

Advertisement
Advertisement

Recommended

Visit/economy/asian-economy/chinas-economy/601494/the-tug-of-war-over-hong-kong
China's economy

The tug of war over Hong Kong

China’s move to take more control over Hong Kong could lead to deeper civil unrest and imperil its role as a global financial centre.
13 Jun 2020
Visit/investments/stockmarkets/china-stockmarkets/601490/chinese-stocks-are-set-for-a-bumpy-ride
China stockmarkets

Chinese stocks are set for a bumpy ride

Chinese stocks have held up well during the pandemic, but the recovery has been uneven.
12 Jun 2020
Visit/investments/stockmarkets/601452/us-china-tension-mounts
Stockmarkets

US-China tension mounts

Could a resumption of the US-China trade war sink the stockmarket?
5 Jun 2020
Visit/economy/asian-economy/chinas-economy/601018/chinas-economy-to-shrink-for-the-first-time
China's economy

China’s economy to shrink for the first time since 1976

China may now be on course for its first quarterly contraction since 1976, with Goldman Sachs predicting a 9% plunge in first-quarter economic activit…
20 Mar 2020

Most Popular

Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/commodities/gold/601587/bullish-gold-price-cup-and-handle-chart-pattern
Gold

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020
Visit/economy/global-economy/601579/how-pent-up-demand-could-drive-a-v-shaped-economic-recovery
Global Economy

How “pent-up demand” could drive a V-shaped economic recovery

“Pent-up demand” is usually a myth. But not this time. The Covid lockdown has created genuine pent-up demand, says Merryn Somerset Webb. That’s now be…
29 Jun 2020