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The Haney Group: China Growth Slows

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The Haney Group: China Growth Slows to 7.5% as 2013 Target under Threat

China’s economy slowed for a second quarter as growth in factory output and fixed-asset investment weakened, adding to risks that the government will miss its expansion target as Premier Li Keqiang reins in a credit boom.

Gross domestic product rose 7.5 percent in April-to-June from a year earlier, the National Bureau of Statistics said in Beijing, equaling the median forecast in a Bloomberg News survey and down from 7.7 percent in the first quarter. June production growth matched the weakest pace since the 2009 global recession.

The slowdown may increase speculation that policy makers will act to safeguard their growth goal of 7.5 percent for the year even as Li signals reluctance to boost stimulus and tries to reduce financial risks. With the International Monetary Fund last week cutting its outlook for global expansion, Li’s administration faces limits on turning to exports for support.

“The new government under Mr. Li should be seriously worried about the prospect as to whether they can meet the growth target,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong, who formerly worked at the World Bank.

Expansion (GDPNTTLY) should stabilize this quarter and may rebound in the following period “if monetary policy can quickly adjust to reflect the rapidly changing domestic and external environment and fiscal policy can be more active by targeting effective investment projects and technology upgrading,” Liu said. “Otherwise, the growth trajectory is heading to less than 7 percent.”READ FULL ARTICLE AT BLOOMBERG.COM

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