Business slowdown in China


The first real question is actually how serious the economic slowdown. Undoubtedly, growth was reported in the past decade double digits, but while official sources indicate that the growth rate remains a healthy 7%, according to a number of independent analysts, the real figure is closer to 5%. For a country that is at a stage of development in China, this is still a healthy pace. The slowdown of the Chinese economy was inevitable, but to understand the panic at the moment – because that is the right term, the author states – one must accept one of the two hypotheses. Or that the investors of practice did not account for the fact that the economy will actually be delayed or that the fear that the delay is even more seriously – to below 5%.

The latest bout of global risk aversion was triggered by the surprise decision by China to devalue its currency against the dollar, which many razchetoha as a signal of panic among Chinese politicians and expertise to support exports and growth. The decision was not communicated well and this coincided with weaker trade and generally more volatile markets in August.

On the other hand, fundamentally it makes sense yuan detach partially from the rising dollar in the period in which the dollar is likely to continue rising, and the other Asian currencies are weak. Indeed, last week production data in China showed weight loss and renewed fears about the extent of the economic slowdown, but other data, especially consumption, suggests healthy growth.

If growth is actually around 5%, China stands before difficult task to deal with the economic transition and the weight of the world economy will start to move, but its fundamentals global growth is not threatened. If you growth in China slowed to 3% or even 1%, then the recent declines in stock prices are just the beginning, says Weldon.