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China: Handle with care
There’ll be no easy fix for fragile China, according to the country’s leaders. China’s Premier Li Keqiang told investors today: “We will not take, in response to momentary fluctuations in economic growth, short term and forceful stimulus measures” Adding that “We will instead focus more on medium to long term healthy development”.
The comments appear to rule out the possibility of major stimulus to counter falling growth. Mr Li also told delegates he’s relaxed about not precisely hitting the official growth target of 7.5 percent:. “It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that.”
Stalling growth and a run of weak economic data has many investors worried about a ‘hard landing’ in China. While trying to assess the true state of the world’s second largest economy is a tough task, official GDP numbers are viewed with caution by many economists, including Saxo Bank’s Chief Economist Steen Jakobsen; who predicts a true growth figure of between four and six percent: "The official statistic, the number, will be whatever they want because it is just taken from the air so to speak” warns Steen.
Steen Jakobsen suggests using Hong Kong GDP as a useful indicator for growth on the mainland. Hong Kong growth is currently measured at around 3.75 percent.
Last week China’s leadership introduced so called ‘mini stimulus’: tax cuts for smaller firms and greater investment in the Railways, but Steen Jakobsen sees those measures having little effect on growth.
Data due to be published next week is expected to show that China grew by 7.3 percent in Q1, the weakest rate since 2009.
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