With slower growth numbers, China can’t prop up world economy
By Chico Harlan,
BEIJING — China’s economy is expanding at the slowest rate in three years, government data released Friday showed, reinforcing concerns that Beijing will not be able to prop up a global economy being dragged down by sluggishness in the United States and Europe.
Chinese gross domestic product grew by 7.6 percent in the second quarter, year over year, down from 8.1 percent at the start of the year. That growth rate is the weakest since 2009 during the depths of the financial crisis, and far removed from the double-digit growth rates of 2010.
The fresh numbers were in line with market expectations, and Asian stocks rose slightly on the news. But the figures also marked the sixth consecutive quarter of deceleration for the world’s second-largest economy, according to data from the state-run Xinhua News Agency. And they come at a time when officials here are pressing for ways to drive consumption and make up for slumping demand for China’s exports.
Recently, that has meant a series of interest rate cuts and stimulus measures — short-term tools that have led many economists to predict an uptick for the Chinese economy later this year.
China, preparing for a oncea-decade leadership handover later this year, still seems in line to easily meet the 7.5 percent GDP growth rate that Premier Wen Jiabao set as the target in March — important for a Communist Party that has long pointed to GDP as an emblem of economic strength.
But some economists say that China is in a battle over how to maintain the turbocharged growth of the past three decades. For years, China did this with government investment in production, tamped-down consumer demand and plenty of exporting.
After the 2008 global economic shock, China responded with an enormous stimulus — one that produced fresh investment in infrastructure, a lending boom and severe inflation.
Almost half of China’s GDP growth last year came from investment, but that boom is faltering, economists say, because a good deal of the money was misspent.
Additionally, China has moved in the past year to curb inflation by reining in lending, another factor that leads to slower growth.
“So what we’re seeing now, essentially, is that the investment boom that has driven China for the last three years is now falling apart under its own weight,” said Patrick Chovanec, an assistant professor at Tsinghua University in Beijing.
Some Chinese authorities would like to boost relatively meager consumer spending, but doing so would require a meaningful shift from a planned economy to a market economy. It would also upend the status quo, driving growth in new industries and hurting traditional ones.
At a briefing Friday, Chinese government spokesman Sheng Laiyun acknowledged that China, “after 30 years of vigorous growth . . . has entered a transition.” But he said that growth between 7 and 8 percent is “good,” particularly considering the tepid global economy and slumping performance in emerging economies such as India and Brazil.
Economists predict better numbers here for the third quarter after China’s central bank cut interest rates twice since June.
That triggered a notable jump in bank loans — from 793 billion yuan ($124 billion) in May to 920 billion yuan ($144 billion) in June — and a slight rebound in property sales, which analysts describe as signs of a short-term rebound.
The current government policy moves are part of a calculated effort to “make the economy look good” as a younger generation of leaders rises to power, said Liang Xiaomin, an economics professor at the Business School of Beijing Technology and Business University.
“The economic stimulus will have functions in the short term,” Liang said, “but in the long term, the government cannot stop the economy sliding to the bottom. . . . Definitely 7.6 percent [GDP growth] won’t be the bottom of China’s economy in the foreseeable future.”
Zhang Jie contributed to this report.
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