The Chinese Economy

Economic Slowdown:

There is plenty of concern about the slowdown in China's growth, and what this might mean for businesses looking at expansion via China. To what extent should those businesses be worried about slower growth?

It is probably bad news for the over-supplied Chinese housing market, so any investments which rely upon that continuing to boom may well be at risk.

However, it also reflects a shift towards more consumer expenditure in China - which sounds positive for those businesses rushing to provide consumer products and services to supply the growing GDP per capita and the hunger for new lifestyles in the country.

There is also reference to the shift in outsourcing as China loses it's low cost advantages with businesses shifting manufacturer to other Asian countries like Vietnam.

China’s economic slowdown deepened with unexpected decelerations in industrial-output and investment growth and a decline in home sales, testing policy makers’ reluctance to step up monetary stimulus.

Factory production rose 8.7 percent in April from a year earlier, the National Bureau of Statistics said in Beijing, compared with the 8.9 percent median estimate of analysts surveyed by Bloomberg News. Fixed-asset investment increased 17.3 percent in the first four months of the year, the slowest for the period since 2001, and home sales fell 9.9 percent.

The figures signal risks are increasing that China will miss the year’s expansion goal of about 7.5 percent, as the government’s efforts to counter the slowdown, including tax breaks and spending on railways and housing, have yet to gain traction. The central bank said today it told banks to approve home mortgages in a timely manner, amid a cooling in the property market.

“If the government wants to keep the growth rate around 7.5 percent, the next step is definitely substantial easing in monetary policy,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, who formerly worked at the World Bank. He said he expects an across-the-board cut in banks’ reserve-requirement ratio by the end of June.

The Shanghai Composite Index (SHCOMP) fell 0.1 percent at the close, while the yuan strengthened 0.1 percent to 6.2302 at 4:07 p.m. local time.

Retail Sales

Factory-production growth compared with an 8.8 percent increase in March and was the slowest since 2009, excluding January and February data that are distorted by the shifting timing of the Lunar New Year holiday. Retail sales advanced 11.9 percent in April from a year earlier, compared with the 12.2 percent median projection of analysts and the same gain in March.

The median estimate for January-to-April expansion in fixed-asset investment excluding rural households was 17.7 percent, after a 17.6 percent rise in the first three months of this year.

The value of homes sold declined 18 percent in April from the previous month, according to the difference between statistics-bureau data for the first four months of the year and the first quarter.

It’s time for the central bank to lower banks’ reserve-requirements and prime lending rates, Australia…