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China’s 3rdQuarter Misses on GDP Growth
October 29, 2018 There was disconcerting news last week out of China, where the economy grew at its slowest pace since the financial crisis almost a decade ago. The Chinese economy grew 6.5% Y/Y in the third quarter of 2018 – missing expectations of 6.6%. While most Western economies would kill for that sort of growth, it’s more evidence that China is not only faced with significant levels of corruption, it is only moving further away from the days when its economy regularly expanded over 10% each year. The slowdown appears to be due to weaker domestic spending: car sales fell 7.1% in the past year, the steepest decline since 2002, and although investment in swanky infrastructure grew by 3.3%, that’s well down on a year ago. The trade war stakes just got higher. The global recovery from the financial crisis has been largely driven by China’s relentless expansion: companies have turned to the country to sell things like oil and computer chips in the face of subdued demand from Europe in particular. Now, a domestic slowdown in China could be aggravated by ongoing trade war as US tariffs begin to bite in the coming months – with one trade analyst predicting growth could slip as low as 6.0% next year, which could spell trouble further afield and cause Premier Xi Jinping to further his efforts at overturning the liberal reforms of previous administrations. There have been wild swings in China’s stock market, which is sitting near four-year lows, and the local currency, has taken a bruising. The country’s financial chiefs are trying to stem the bleeding by singing from the same hymn sheet in a rare coordinated plea to reassure investors. Chinese regulators said that they would introduce measures to calm markets, adding that the stock market rout was abnormal and that the country’s economic fundamentals were solid. Investors around the world will be hoping that they’re right. As growth slows, the free flow of government investments in technology such as OLED fabs may encounter more deferments, especially as the existing production remains low due to poor yields. |
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Barry Young
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