Regions

China cloaks weakest growth since 2009

October 20
3:52 AM 2015

The world's second largest economy witnessed its lowest growth rate in the last two decades. China's gross domestic product (GDP) growth rate dipped below seven percent during the third quarter for the first time after the financial crisis. A record of 6.9 percent, below the Chinese government's target of seven percent and slightly better than the forecasted 6.8 percent. This is translating into more pressure on the Chinese government to lower interest rates and some measures to strengthen the growth rate. 

After the latest data from National Bureau of Statistics, economists forecast that China's economy may continue to weaken till 2016. The Chinese government has been assuring the global market that economy situation was well under control after unexpected currency Yuan devaluation in August. 

"Though underlying conditions are subdued, but they're stable. Stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters," said Julian Evans-Pritchard, an analyst at Capital Economist in Singapore. 

The third quarter's disappointing growth rate could be the lowest level for 2015 as the latest stimulus measures being implemented by the Chinese government will boost growth in the fourth quarter. The gross domestic product growth rate is slowing down while fears of deflation are rising. 

In this situation, China will have to slash reserve requirement ratio (RRR) by 50 basis points in the fourth quarter, advises ANZ Bank in a note. Considering the deflationary situation, People's Bank of China (PBoC) should adjust the benchmark interest rates including lending rate downwards, opine economists.

As part of the crisis management and keep up the business confidence at a higher level, Chinese officials termed the latest dip in economy growth rate was reasonable. China's President Xi Jinping recently said that the government has concerns about the economy and was in a process of streamlining the situation. 

The consumer inflation rate cooled more than anticipated in September. Producer prices continued to slide for 43 months in a row. To check the current sluggishness in the economy, Chinese government eased restrictions on property sector and in the process of speeding up the investment in the infrastructure segment.

China is facing the worst situation in the economy during the past six years. China's central bank lowered interest rate for five times since November and also reduced bank's reserve requirement ratios for three times in 2015 alone. China's GDP growth rate was 6.2 percent during the first quarter of 2009. 

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