An update on the Asian Scene: China’s GDP
China’s real GDP growth held stable today at a figure of 7.3% year on year in Quarter 4 from Quarter 3 which is in line with most the financial houses expectations. The full year 2014 GDP for China is 7.4% which is slightly below the official targeted figure of 7.5%. Back in 1990, the year on year GDP growth was 3.9% but the main difference then and now is that back then China was at the beginning of their economic renaissance.
Currently what we are seeing is a China which is seeing moderate growth and you can expect that the next lap of China’s growth will be surrounded with fiscal regulation and sustaining growth targets already set. China’s government is also trying to prevent speculators from running its assets to a bubble stage and later ending with a big pop. At the same time, we can see that China is also trying to improve local consumption so that its economy can be to a certain extent be insulated from a fall in exports due to languishing imports from Europe and other importing countries. Although we can see that these are targets that are set over a longer period of time, China still needs growth in areas such as employment, wealth building and ensuring that the country remains competitive globally.
Over the weekend, China introduced regulations on margin lending accounts and this is again to stifle speculators from becoming too bold with the easy capital. On top of that, the Chinese banking regulator have also pulled the trigger on business to business lending (B2B) and also clamped down on what is called the shadow banking system which have been said to amass much of the loans over the years and beyond the purview of the regulators. This would stabilize China’s banking system and make it look more in control and credible.
So how is China going to perform over the year?
Talk on the street and reports from financial firms seems to indicate that they are NOT so confident of China becoming a runaway horse in the race. In fact, Nomura is expecting China to experience a downtrend in its GDP and they have given their expectations for GDP figure in Quarter 1 2015 which is a downward revised figure of 7.1% year on year citing deep rooted domestic problems such as tighter controls over local government debt, the property market correction and plain old deleveraging. For the whole year of 2015, they are expecting a GDP growth forecast of 6.8%. A better figure of 7.0% expected only if the government loosen the policy some more which means more rate cuts in every quarter.
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