China’s Q2 Growth Slips to Lowest Level in 3 Years


China’s economy grew at 7.6 percent in the second quarter of 2012, marking its sixth straight consecutive quarter of decelerating growth, its slowest pace in three years.

The decelerating growth confirms fears of a so-called hard landing in China, and heightens worries over its subsequent impact on the rest of the world.

China is the world’s second largest economy and accounts for about a fifth of the world’s total economic output.

Any Chinese slowdown may dash hopes of a global recovery and at the same time, many of Asia’s biggest and emerging economies are increasingly reliant on China as a trading partner.

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China’s data comes just days after a raft of negative reports from the United States and Europe.

In the United States, June unemployment rate remained stubbornly high at 8.2 percent. In Europe, Germany’s business confidence fell to its lowest level in more than two years while Greece announced a forecast of 7% contraction this year.

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In March, Beijing had revised its 2012 growth target to 7.5 percent – the lowest in 20 years. However, China would have to further stimulate its economy for that to occur, said some analysts.

In a bid to boost private sector activity, the People’s Bank of China has already cut interest rates twice since June, lowering the borrowing cost for major borrowers by almost 1.7 percent.

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"Now that China's growth is slowing, there are calls for yet another stimulus," said Edward Chancellor, global Strategist at investment management firm GMO, in an interview with the BBC.

“A lot of things are pointing in the same direction. There have been aggressive interest rate cuts, liquidity injections, an increase in lending and more approvals of infrastructure projects,” Shen Jianguang, an economist with Mizuho Securities, told the FT.

“We might see a pretty powerful recovery in the fourth quarter to make the full-year GDP reach 8 per cent,” he added.

However, Chancellor warned:

If these calls were heeded that would mean China would end up with more industrial overcapacity, more bridges to nowhere, more empty airports and hundreds more miles of ludicrously uneconomic high-speed rail.

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