China GDP climb does little to reassure investors

China’s second quarter annualised gross domestic product figure of 7% beat expectations of 6.8% but it has done little to increase investor confidence in the world’s most populated country.

China GDP climb does little to reassure investors
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“When people come to write the history of this period they will give a bigger role to China,” Greetham added. “The global housing bubble that set the scene for the Global Financial Crisis had its roots in the low interest rates central banks set to offset the deflationary impact of cheap Chinese manufactured goods in the 2000s. China was also recycling its trade surplus aggressively into overseas bond markets, further stimulating their economies.”

Schroders’ emerging markets economist Craig Botham is giving the Chinese government the benefit of the doubt. “While it would be easy to claim this is a classic case of the authorities fudging the numbers, we will resist temptation,” he said. “The breakdown of GDP provided shows the primary and tertiary sectors accelerated whilst manufacturing slowed.

“Our view is that GDP growth built on an equity market bubble is unsustainable, and with a weaker equity market performance likely in Q3, a repeat GDP shock seems unlikely,” Botham added. 

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