After repeated warnings from economic experts within the Central Committee that the economy needs to be cooled, government initiatives seem to be finally taking effect as the economy expanded by 10.2 percent in the second quarter compared to the same period in 2009, a figure significantly reduced from the first quarter figure of 11.7 percent.
The high Q1 data set many policymakers on edge as they feared the economy would overheat if left unchecked and recent comments from the government seem to indicate they are more comfortable with a reduced pace of economic growth.
“We are at a turning point for our economy and efforts to diversify income streams will naturally affect growth figures, this is acceptable and expected,” said a National Bureau of Statistics representative. “We must also make sure that overheating does not occur and the slowdown of the economy should not distress anyone, it will do us good in the long-term.”
The cooling may be good for China but investors are on the brink of losing the only market that has consistently yielded dependable and strong figures at a time when the two other biggest markets, the U.S. and Europe, look like they will struggle to make a full recovery from the global financial crisis.
The government might hope to allay fears by relaxing the recent measures they have put in place over the housing market, among other sectors.
“It will be very interesting to see exactly how Beijing are planning to let the housing market down easy after the tough restrictions they put in place only a couple of months ago,” says Citic Bank International head analyst Liao Qun. A prominent Beijing-based investment firm, Clarus China Everbright, said recently that if the housing industry slows any more it could have a permanent affect on related sectors like steel and electrics.
It’s hard to gauge the month-by-month health of the Chinese economy because of the way Beijing release their growth data, which lacks sequential, seasonally adjusted figures. As a result, estimates by private firms can vary wildly.
Inflation seems to have been temporarily stymied by the declining activity in the housing market, while consumption and exports have maintained relatively solid performance. There was a 20 percent jump in retail sales according to official figures, and fixed asset investment also grew by a huge 25 percent in the first 6-months of 2010.
