Chinese economy runs out of steam

The dragon is struggling to breathe fire, as retail sales and industrial output miss forecasts.

by Rachel Savage
Last Updated: 16 Apr 2014

China has dragged the global economy along since the financial crisis, defying the dead weight of the debt-laden developed world. However, a slew of disappointing data has stoked fears that the dragon may be running out of puff.

The country’s industrial output rose 8.6% year-on-year in January and February, according to the National Bureau of Statistics, while retail sales climbed 11.8%. The data is stuff aged western economies can only dream of nowadays, but was below expectations of the economic powerhouse.

Meanwhile, Chinese premier Li Keqiang told a press conference that the government was targeting economic growth of 7.5% this year, adding, ‘We believe we have the ability, and all the means, to ensure that economic growth will stay within a reasonable range this year.’

China is notorious for using stately might to massage economic figures, but 7.5% would still be the lowest growth since 1990, when Beijing was hampered by sanctions after gunning down protestors in Tiananmen Square.

Li also said more debt defaults were ‘unavoidable’ as the government loosens up financial regulation. Shanghai-based solar panel maker Chaori Solar failed to pay interest on Rmb1bn (£98m) of five year bonds last week, the first Chinese bond default in as long as people can remember.

However, Li added, surprise surprise, that the government wouldn’t let defaults threaten the wider economy. As ratings agency Moodys pointed out, most bonds are issued by state-owned enterprise anyway, so unless Beijing sells off the commanding heights a deluge of defaults isn’t much of a danger any time soon.

Even so, if the Chinese economy continues to slow down, Western economies may struggle to take up the global slack and could find their own recoveries cooling off.


Find this article useful?

Get more great articles like this in your inbox every lunchtime