China GDP statement provides little reassurance

Chinas statement that its economy is growing in line with expectations at 7% has provided little reassurance over its growth prospects.

China GDP statement provides little reassurance


While the headline number itself is not alarming it is the story behind the number which is concerning investors and economists.

“Although the latest Chinese GDP data was in line with expectations, there is doubt whether stimulus efforts are enough to cause growth to accelerate,” said Craig Botham, emerging markets economist at Schroders.

“It is an open question whether things will improve meaningfully from here. The first quarter of 2014 was a weak quarter, providing a lower base effect to flatter performance this year. This will be reversed for the second quarter onwards, so a substantial pick-up will be needed if the 7% target is to be reached.”

“Stimulus efforts so far do not, in our view, constitute a strong enough response to cause a great acceleration in growth,” Botham added.  

“Recent economic indicators for China have all been weak, so it was not a surprise that real GDP for 2015 Q1 was reported at 7% year-on-year, the lowest figure for many years,” said John Greenwood, chief economist at Invesco. “Given the fact that net exports contributed positively, this must mean that the GDP deceleration was mainly due to very weak domestic demand.”

According to the head of Asia Strategy at SEB Sean Yokota, the near term outlook is further slowdown. “China’s economy continues its slow downtrend and records the lowest growth since Q1 2009 during the global financial crisis when GDP dropped to 6.6%,” he said. The economy’s momentum is clearly falling where sequential growth slowed to 5.2% annualised compared to 6.0% in Q4.