China’s economy grew in the first quarter at its weakest rate since the second quarter of 2009. It’s not a total disaster – we’re still talking 8.1% growth, which is the kind of figure most Western nations would give up their spot in the bailout queue for – but it’s precisely the sort of news that you’d imagine would give an already battered Eurozone more cause for concern.
Yet all signs so far suggest people aren’t yet too spooked – there’s been a muted response this morning on the London markets, for example – probably because much of the data coming out of China painted a more upbeat picture. Industrial production rose 11.9% over a year earlier in March, up 0.5 percentage points from January-February. Retail sales rose 15.2%, also up 0.5 percentage points from the previous two months. Export growth was up to 8.9%, well below China's double-digit rates in recent years, but still decent.
The widespread scepticism surrounding the accuracy of Chinese economic data may also have something to do with the market's unspooked response so far.
Of course such blips are bound to happen, especially when you’re talking China, which has been growing like a spinach-farmer’s son hitting puberty. Remember its phenomenal 10.4% expansion in 2010? Growth has been declining steadily since, following a slump in global demand for its exports and the Chinese government taking steps to stop the threat of out-of-control inflation by correcting its domestic property market.
All of which was inevitable really. Such a rapid rate of growth is impossible to maintain. Yet the alternative requires careful handling: while an uncontrolled slump could have global repercussions, hurting demand for oil, industrial components and consumer goods at a time when US and European growth are weak, settling in to a more sustainable natural growth rate will be far better for everyone.
It’s looking like this isn’t sign of a sensational slump. The World Bank and private sector reckons China will achieve a ‘soft landing’ – with growth expected to rebound later this year to 8.2%. That’s down from its projection last year of 9.2%, but still a world away from the bumpy ride experienced by the laggards of the US, Japan and Europe.