China’s economic growth has slowed to a three-year low, damping hopes it can make up for US and European weakness, but analysts said a rebound might be in sight.
The world’s second-largest economy grew by 7.6 per cent in the three months ending in June over a year earlier, down from the previous quarter’s 8.1 per cent, data showed on Friday.
The figure was lowest quarterly growth since the first quarter of 2009 during the depths of the global financial crisis.
China’s slowdown could have global repercussions, especially at a time when the United States and Europe are struggling. Lower Chinese demand could send shockwaves through Asian economies that supply industrial components to its vast manufacturing industry.
Exporters of oil, iron ore and other commodities such as Australia, Brazil and African nations will also be concerned.
Other indicators, though, including strong June bank lending, which is closely tied to business activity, suggest the low point of the decline might be past, analysts said.
“The Chinese economy has already bottomed out in the first two quarters,” said Xiao Li, an economist at Industrial Bank in Shanghai.
The slump raises the threat of job losses and political tension. That comes at a politically difficult time for the ruling Communist Party, which is trying to enforce calm ahead of a planned once-a-decade handover of power to younger leaders.
The government is moving cautiously after its 2008 stimulus pushed up inflation and spurred a wasteful building boom. Authorities have said curbs imposed on building and home sales to cool surging housing prices will remain in place, even though pumping up the country’s slumping construction industry offers a quick way to boost growth.
Some parts of Beijing’s response to the slump threaten to set back efforts to reduce reliance on exports and government investment and to nurture more self-sustaining growth driven by domestic consumption.
Premier Wen Jiabao said this week that sustaining investment should be China’s priority, an acknowledgment that efforts to boost consumption are taking longer than expected to gain traction.
June retail sales growth declined to 12.1 per cent adjusted for price changes, down from the previous month’s 13.8 per cent growth, the National Bureau of Statistics reported. Growth in factory output edged down to 9.5 per cent from May’s 9.6 per cent.
In a reflection of efforts to spur the economy with higher investment, growth in spending on factories, real estate and other fixed assets accelerated to 23.2 per cent in June, up from the previous month’s 20.1 per cent.
The first half “saw the bottom of the cycle and growth is set to rebound” later in the year, said Credit Agricole CIB economist Dariusz Kowalczyk in a report.
China’s relative strength compared with Western economies conceals severe pain in some segments of the economy. Retailers in some areas say monthly sales have fallen by as much as half and the Chinese shipbuilding industry association says orders in May were down by almost half.
