China’s Economy Heading for a Soft Landing

China’s Economy Will Slow Down

First Published Date : November 3, 2011 ADawnJournal.com

China’s economy, the second largest economy in the world, will grow in the future, but possibly at a much slower pace. The latest data, at least some of them, point out the slower pace compared with the robust pace in the past decades. Chinese economic growth slowed to 9.1 percent in the 3rd quarter, while the previous quarter had 9.5 percent growth.

China’s GDP increased to 10.4 percent in 2010. However, 2011 GDP growth is expected to be 9.4 percent or even below 9 percent. The Chinese manufacturing index showed positive growth last month, but employment growth failed to show any significant improvement. To offset the slower economic growth and external demand for Chinese manufacturing products, the Chinese government is planning to boost support for employment growth in the local small business and service sectors.

There are concerns in the credit market as the Chinese government’s recent tighter liquidity control showed significant sharp drop in new lending, pushing the credit costs upward. This caused profit margins to slim for the Chinese firms. Trust loans and the margin deposit went down below regular level in the last quarter.

Based on various data and analysis, the economic outlook for China is mixed at this moment. On one side, we have GDP and export figures showing an imminent economic slowdown. On the other, we have gains in local consumption and fixed-asset investments caused by minimum wage increases and other factors.

The middle class population is estimated to be approximately 250 million in China. However, their consumption level is still low when compared to other nations. However, in recent years domestic consumption has been on the rise and the Chinese government is looking to use this consumption growth to build a sustainable economic growth for years to come.