China’s economy grows by 7.5% on year over year basis
The last few weeks have been especially volatile as the broader markets have aimed to predict the actions of the world’s central bankers. China economic stumbles as of late have exasperated the volatility abroad as the country’s economic strength is so vital to the strength of many European nations. Fears of a credit crunch, tighter monetary policy, slowing GDP growth, diminished wage increases, and lower than expected property demand have cause some analysts and myself to doubt the country’s ability to sustain its once incredible growth. Recent interest rate spikes within inter-bank lending have caused liquidity problems for the country’s largest financial institutions, a deja vu moment for many American economists. If low liquidity were to hit the financial system, everything from the industrials, to the builders, and property investors could be affected greatly.
While we understand that a mature China cannot grow at parabolic levels, the country must avoid slowing too quickly. Late last night, the National Bureau of Statistics reported the China’s economy grew by 7.5% on a year over year basis. While the growth remains strong in comparison to its developed counterpart, growth did slow down moderately from 7.7% last quarter and 7.9% in the final three months of last year.
More over industrial output came in weaker than some analysts had predicted with an 8.9% rise, down from 9.2% just a month ago. Some bright spots were seen however, retail sales came in significantly higher than most had predicted with 13.3% increase, up from 12.9% during the month May. The weakening economic data has come largely in line with the five year path laid out by the Chinese government. Over the course of the next few years the government will actively be targeting the key 7% growth level, to assure economic and lifestyle improvements.
Going forward, I would keep your eye on many of the companies whom derive a significant proportion of revenues from the region as weakness may translate across markets. Specifically, I am watching copper producers to trade in high correlation to the performance of China’s economy.
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