The Chinese economy’s growth for the first quarter of the year was at an annual rate of 6.7%, according to Gross Domestic Product (GDP) data released by the nation’s National Bureau of Statistics on Friday. Although the result was in line with analysts’ expectations, it was lower than the 6.8% rate of the last quarter of 2015. It was also the lowest quarterly rate of growth of the last seven years and the data are nothing but a justification to those who believe that the world’s second largest economy is going through a slowing trend.
Despite the largely pessimistic GDP data, there has been additional Chinese economic data releases that instead point towards growth. Investment activities within construction and fixed assets soared by 10.7% during the last twelve months until February in comparison to the previous month’s rate of 10.2%. Similarly, Chinese consumers do not appear to be holding back from spending given that retail sales data for the same period have increased by 10.5%, compared to previous month’s 10.1%. But on the other hand, these results do not come as a massive surprise, after all China’s economic model is to shift its economy from a being mainly dependent on exports to a consumer-led one.
China is in the process of making an enormous switch from being a goods production and exports nation towards providing services and domestic consumption. For decades now, it has been viewed as the main place where everything was being manufactured and so that was the main driver of the nation’s extraordinary growth. But competition has emerged from other Asian countries which offer cheaper manufacturing solutions and that contributed to China’s slowdown in growth. One can safely assume that this is neither a smooth nor easy transitional process given that thousands of workers have to be moved from factories and into other professional sectors. Arguably, this is the way forward for the economy in order for growth to be sustained, but for now this transitional period is a sign of further instability.
Some argue that although Chinese economic data provide a measure of the nation’s health, they are not considered by many investors as highly accurate. There is a number of firms that attempt to hyperbolise their output results so that they can attract more clientele, but there is also a group of firms that look to understate their output so that they can be eligible for government benefits.
The GDP data were nevertheless able to affect the markets and the Chinese FTSE A50 Index on Friday decreased by 0.5%, that was after gains from Monday to Thursday by 3.6%. This is a sign that the weak GDP data raised worries for additional monetary stimulus measures by Beijing. More global uncertainty that might provide opportunities for investors come from Sunday’s meeting of members of the exporters’ group Opec who discussed the possibility of freezing oil output.
The Chinese economy’s growth for the first quarter of the year was at an annual rate of 6.7%, according to Gross Domestic Product (GDP) data released by the nation’s National Bureau of Statistics on Friday. Although the result was in line with analysts’ expectations, it was lower than the 6.8% rate of the last quarter of 2015. It was also the lowest quarterly rate of growth of the last seven years and the data are nothing but a justification to those who believe that the world’s second largest economy is going through a slowing trend.
Despite the largely pessimistic GDP data, there has been additional Chinese economic data releases that instead point towards growth. Investment activities within construction and fixed assets soared by 10.7% during the last twelve months until February in comparison to the previous month’s rate of 10.2%. Similarly, Chinese consumers do not appear to be holding back from spending given that retail sales data for the same period have increased by 10.5%, compared to previous month’s 10.1%. But on the other hand, these results do not come as a massive surprise, after all China’s economic model is to shift its economy from a being mainly dependent on exports to a consumer-led one.
China is in the process of making an enormous switch from being a goods production and exports nation towards providing services and domestic consumption. For decades now, it has been viewed as the main place where everything was being manufactured and so that was the main driver of the nation’s extraordinary growth. But competition has emerged from other Asian countries which offer cheaper manufacturing solutions and that contributed to China’s slowdown in growth. One can safely assume that this is neither a smooth nor easy transitional process given that thousands of workers have to be moved from factories and into other professional sectors. Arguably, this is the way forward for the economy in order for growth to be sustained, but for now this transitional period is a sign of further instability.
Some argue that although Chinese economic data provide a measure of the nation’s health, they are not considered by many investors as highly accurate. There is a number of firms that attempt to hyperbolise their output results so that they can attract more clientele, but there is also a group of firms that look to understate their output so that they can be eligible for government benefits.
The GDP data were nevertheless able to affect the markets and the Chinese FTSE A50 Index on Friday decreased by 0.5%, that was after gains from Monday to Thursday by 3.6%. This is a sign that the weak GDP data raised worries for additional monetary stimulus measures by Beijing. More global uncertainty that might provide opportunities for investors come from Sunday’s meeting of members of the exporters’ group Opec who discussed the possibility of freezing oil output.
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