China Growth Slows But Not by As Much As Feared

01/20/2015 5:37 pm EST


Jim Jubak

Founder and Editor,

Data released for China economic growth was slightly ahead of expectations and well ahead of market fears, but MoneyShow's Jim Jubak doesn't think that's especially reassuring for anyone still waiting to see signs that China is shifting its economic focus.

China's economy grew at a 7.3% year over year rate in the fourth quarter of 2014. That was short of the official target of China-7.5%-but slightly ahead of the 7.2% expected by economists surveyed by Bloomberg and well ahead of market fears that growth would break below 7%. On the news, the Shanghai Composite Index, which had tumbled 7.7% on Monday night, breathed a sigh of relief and recovered some ground to close up 1.82%.

The data wasn't especially reassuring for anyone who fears that China's real estate market isn't the engine of growth it was earlier in this cycle and who has noticed that China is getting less bang for every yuan invested in big infrastructure projects. These folks would like to see signs that China is successfully rebalancing its economy by moving away from a dependence on heavy spending on fixed asset investment and exports toward a greater reliance on consumer spending. In 2014, growth in fixed asset investment did fall to 15.7% from 19.6% in 2013, but government policy continues to look first to increases and acceleration in spending on such things as high-speed rail and airports when it comes time to stimulate the economy. Consumer spending did climb 3 percentage points from 2013 to make up just over half of Chinese GDP at 51.2%, but that figure still leaves China trailing the 60% of GDP that comes from consumer spending in India or the 67% in Mexico, according to the World Bank. (In the US economy, the figure is 68%.)

Today, the International Monetary Fund released its updated forecasts for global economic growth. The world economy will grow by 3.5% in 2015, down from the October forecast of 3.8% growth. According to the IMF, China's economy will grow by 6.8% in 2015. That's down from a 7.1% forecast in October.

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on MARKETS