China’s Economic Growth in 2013; Economic Recovery Lost Some Steam in the First Quarter

Signs of softness have mainly come from domestic demand. One possible explanation for the slowdown is the government’s efforts to crack down on official banqueting and excess spending, which led to a sharp deceleration in spending at restaurants. Fixed asset investment, the other key driver of China’s domestic demand, grew only slightly faster in the first quarter compared with the growth pace in 2012. The continued improvement in real estate and infrastructure investment was partially offset by the significant deceleration of private investment in the manufacturing sector.

The continuing trouble in the Eurozone and a still fragile global recovery, combined with inconsistency between China’s export numbers and its major trading partners’ import numbers, raised many doubts about the real magnitude of exports. Popular theories to explain this discrepancy include trading companies’ fake trade transactions to take advantage of tax benefits or overstated exports and understated imports in order to circumvent capital controls and bring capital back into China.

The comparison of China’s export numbers with its major trading partners’ import numbers raised many doubts about the real magnitude of exports. Popular theories to explain this discrepancy include trading companies’ fake trade transactions to take advantage of tax benefits or overstated exports and understated imports in order to circumvent capital controls and bring capital back into China.

Electricity production showed only 3 percent growth in the first quarter; the official and private purchasing manager’s indexes have been staying in the expansion zone, but generally on a downward trend.

We maintain our forecast that GDP growth in China will be slightly better than the 7.8 percent level seen last year, and industrial value-added is expected to increase 9-10 percent. 

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Publish Date: 
Tuesday, May 21, 2013
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