The Second Quarter Had A Slow Down Effect On China’s Economy

Lucian Brasoveanu

Written by Lucian Brasoveanu
Posted in: Business
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China

China’s economy managed to keep up the pace in the second quarter of 2011, although the growth was slightly slower than during the previous quarters. This is mostly due to the challenges that Beijing has to face these days considering the world’s economy.

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According to the numbers released on July 13, the second-largest economy in the world managed to increase by 9.5 percent if we were to compare the numbers to those reported during the second quarter of 2010. It’s true that this is a growth, but it’s not as significant as we all would expect considering the percentages in the past. On the other hand, this slow down was desired by the Beijing government and is welcome in their opinion.

The past year was used by the Chinese authorities to limit bank lending, because this is the main factor that has lead to an accelerated growth. In the same time, the government has also favored property prices that have gone up and all categories of consumer prices that have rose significantly. Another decision taken by Beijing was to have the central bank raise interest rates. Since October 2010 this decision was taken five times.

The main concern of the Chinese authorities is the inflation level which is still higher than desired. Therefore, the authorities have to find a solution that will allow them to keep under the control the prices and in the same time won’t affect negatively the growth.

Unfortunately, the decisions made until now in this direction by the Chinese government have raised concerns that the economy will become too weak, too fast. If that were to happen, the world’s entire economy would be affected, especially now, when the USA and Europe are trying to keep under control the debt load and the rising unemployment rate. China is considered to be the main source of growth and doesn’t have that much support from Japan because this country is still recovering after the earthquake and the tsunami that changed the lives of many on March 11.

For now, economists consider that the landing of the Chinese economy will be soft, especially because the figures released about the June activity of the Chinese economy are “further evidence that China’s slowdown since the start of the year remains moderate and gradual” as Brian Jackson, an analyst said.

Some believe that the central bank will intervene once again this year by increasing the interest rates, but others are convinced that Beijing won’t take such a decision very soon because it doesn’t want to negatively influence growth. We will just have to wait and see.11

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