China’s growth slowed in the second quarter, adding to the worries about the ability of the world’s second-largest economy to offset low growth elsewhere.
The country’s gross domestic product grew at an annual rate of 7.6 per cent in the April to June period, down sharply from the 9.5 per cent a year earlier, according to government figures released Friday morning. The second-quarter growth rate was half a point below the 8.1 per cent for the first three months of this year.
For the first half of the year, the economy grew 7.8 per cent.
“Even though the economy continued to decline, I think that compared to other countries it isn’t bad,” Sheng Laiyun of the National Bureau of Statistics told reporters. “The economy remains steady.”
The decline is partly caused by a weak global economy. Europe, which until this year was China’s biggest trading partner, is in recession, while the United States economy remains weak.
Even developing countries like India and Brazil have weakened considerably.
But part of the downturn is self-induced — an effort by China to wean itself off decades of inefficient growth caused by heavy investment in sometimes dubious projects.
“The most important context for looking at this data is that the boom years are over,” said Andy Rothman of CLSA Research. “The days of 20 per cent growth in autos or luxury goods — that’s mostly over.”
Chinese officials say this reflects China’s maturing economy.
“After 30 years of vigorous growth, China’s economy has entered a period of transition,” Sheng said. “The potential growth will slump, but this is a universal rule.”
Still, the slowdown comes at a sensitive time. The country’s top leadership is due to change in the coming months, and economists are debating whether the country has failed to push economic reforms.
The rate was the lowest since the 2008-2009 global recession, when growth dipped to 6.6 per cent in early 2009 before a huge government stimulus package provided double-digit economic growth.
Now, however, that stimulus has worn off and economists are divided over China’s prospects.
Signs abound of weakness. Housing prices are officially falling for the first time since 2009, albeit only by 1.2 per cent for May.
Optimists point to a number of statistics that, while not exactly shining, do not portend doom. The Purchasing Managers Index remains steady at just above 50, the reading above which conditions are thought to be improving. That rate has not moved in about a year.
Retail sales are up 13.8 per cent, which is slightly down over previous months but not out of line based on historic figures. Exports have also increased to most parts of the world, except struggling Europe.
The challenge, economists say, will be for Chinese companies to adapt to slower growth. Companies in construction and energy industries will face tougher times, but those aimed at consumers could profit.
The current turmoil is part of this transformation.
Top leaders have showed their concern, with China’s premier, Wen Jiabao, warning over the weekend of a “huge downward pressure” on the economy and calling for “a more aggressive manner” in tackling the slowdown.
Last week, the government cut bank lending rates for the second time in a month.
One reason for concern is that 8 per cent has long been seen as a benchmark for acceptable growth. Lower growth, so went the conventional wisdom through the 1990s and 2000s, would lead to instability and unrest because of to the huge number of people entering the labor force each year.
Over the last few days, Chinese news media has been anticipating the GDP report, with one government site asking “will it go below 8?”
Increasingly, however, analysts do not see the situation as so dramatic. “We’re seeing no reports of widespread layoffs and over all they have to be happy,” said Rothman. “As long as employment is holding reasonably steady, things will remain stable.”
Patrick Zuo contributed research
© 2012 The New York Times News Service