China Economy Slowing ‘Significantly,’ Conference Board Says
August 15, 2011, 11:11 PM EDTBy Bloomberg News
(Updates with leading index in third paragraph, foreign direct investment in seventh paragraph.)
Aug. 16 (Bloomberg) -- Growth in China, the world’s second- biggest economy, is slowing “significantly,” according to The Conference Board, a New York-based research organization.
“The economy is significantly moderating right now and also over the next couple of months,” Bart van Ark, the organization’s chief economist, told Bloomberg Television from New York today. “We still expect it to be pretty much a soft landing.”
A leading index for China rose 1 percent in June to 158.9 after a 0.6 percent gain in May, The Conference Board said on its website today. The indicator has slowed “quite significantly” over the past few months, van Ark said.
The Chinese economy is cooling after the government raised interest rates and banks’ reserve requirements and extended curbs on the real-estate market, adding to concerns about the outlook for the global economy. Christine Lagarde, the International Monetary Fund’s managing director, today urged developed countries to support economic growth even as they make fiscal cuts.
The Shanghai Composite Index fell 0.1 percent as of 10:36 a.m. local time.
Slower Growth
The nation’s expansion may slow to 9.2 percent in the third quarter from 9.5 percent in the previous three months, the China Securities Journal reported today, citing the State Information Center. Inflows of capital from trade and investment may help to sustain growth, while complicating central bank efforts to control the money supply and restrain inflation.
Foreign direct investment rose 20 percent to $8.3 billion in July, the commerce ministry said in a statement today.
Beyond six months, the Chinese economy may face “more problems” as a result of bank lending that remains at levels that are probably not sustainable, van Ark said. The nation needs to shift to more of a consumer economy and to build more “social infrastructure rather than the hard infrastructure”, he said.
“Growth in China is actually slowing more seriously than the headline numbers suggest,” Kevin Lai, an economist at Daiwa Capital Markets in Hong Kong, said in a Bloomberg Television interview today. He said that trade volumes showed demand slowing “sharply” in China and the world.
A slowdown in Hong Kong has highlighted the threat of another global slump as weakness in the U.S. economy and a debt crisis in Europe cap demand for exports. The city last week reported that gross domestic product contracted in the second quarter from the previous three months.
“For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans,” Lagarde wrote in the Financial Times. “At the same time we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects.”
--Susan Li, Zheng Lifei, with assistance from Victoria Ruan. Editors: Paul Panckhurst, Ken McCallum.
To contact Bloomberg News staff on this story: Victoria Ruan in Beijing at vruan1@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net
