Slowdown of China’s Growth Leads to Worries about the World Economy
By admin April 17, 2015

Blog W10-Photograph- Toby Melville:Reuters
According to China’s National Bureau of Statistics, Gross Domestic Product (GDP) increased by only 7% in the first three months of 2015, compared to the same period last year. This figure indicates that China’s economy grew at its slowest pace since 2009 in the first quarter. As the world’s second-largest economy, China averaged economic expansion was around 10% a year over the past three decades. This slowdown not only increases pressure on the central government to implement stimulus measures, but also creates concerns about a global economic slowdown.

The current policies of the Chinese government are not substantial enough to keep China’s momentum of growth. Under the pressure of an overall slowdown of the world economy in the past few years, China lowered interest rates several times, loosened bank reserve requirements, and has kept implementing reform in financial market. However, what it has done hasn’t stimulated the economy as expected. One important reason is the fall in export. As the March data from China’s General Administration of Customs showed, China’s export sales shrank by 15% in the last 12 months. It indicates that global demand for Chinese exports is declining. At the same time, the 12.7% drop of imports in March raises concerns about weak domestic demand. This rate of decrease in imports is the fastest since 2009. The slump of China’s factory activity in March is another piece of evidence that explains the slowdown. The index of sentiment among manufacturing purchasing managers fell to 49.2 in March from 50.7 in February, suggesting a contraction of the manufacture sector.

In the latest forecasts from the World Bank, China’s economy should expand by 7.1% in 2015, slower than the 7.2% rate projected in October, while the forecast of 2014 was 7.4%. Given the current situation, Chinese policymakers are expected to take further measures to support growth. For example, policymakers will work to expand fiscal spending and maintain a looser monetary policy.

While China is facing the pressure from slowdown, India, another Asian giant is expected to grow at 7.5% in 2015 according to the International Monetary Fund’s World Economic Outlook recently released. The report says: “growth will benefit from recent policy reforms, a consequent pickup in investment and lower oil prices”. The IMF also believe the economies in Europe, the United States and other advanced economies will recover this year, IMF Managing Director Christine Lagarde said in the World Bank-IMF spring meetings on April 16. One reason, she proposed, of why developing economies like China and Brazil are slowing down is the Declining prices of commodities, such as oil, copper and iron ore.

She also commented that although growth in China will slow, it will continue to make a “phenomenal” contribution to global growth. According to the IMF outlook report, the slowdown in China “reflects a move toward a more sustainable pattern of growth that is less reliant on investment”. In terms of this aspect, the moderate economic expansion is not necessarily bad news. A slowdown within a reasonable range seems to be unavoidable on the path to reform.

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