China’s Economy Grows At Weakest Level In 6 Years

A high speed train is driving past a residential district.Asian stocks indexes are trading lower on Wednesday following news from China that the Chinese economy slowed to its weakest level in six years, highlighting concerns that Asia’s largest economy is weakening and more economic stimulus might be needed to help revive growth.

China’s first quarter 2015 GDP dropped to 7.0 percent from 7.3 percent in the fourth quarter of 2014, according to latest data the Chinese National Bureau of Statistics.

That is the weakest level of economic expansion since the first quarter of 2009 during the depths of the global recession.

In January the IMF lowered its growth forecast for China during the next two years.

For 2015 the IMF forecasts a GDP growth rate of 6.8 percent, lower than their earlier forecast of 7.1 percent while growth in 2016 is expected to drop even further to 6.3 percent, down from 6.8 percent.

Beijing has set a 7.0 percent GDP target for 2015.

Despite lower gas prices benefiting the Chinese economy in recent months, there are some fundamental issues that are working to keep a lid on economic growth in China including a stronger yuan, a weakening property market, and less government spending at the local level which comes as Beijing is attempting to swing the Chinese economy towards domestic consumption and services and away from its reliance on exports and outside foreign investment.

In 2014 Beijing clamped down on China’s shadow banking industry which provided the Chinese economy with an important source of funding but also added to risks across the financial system as concerns grew of a property bubble.

-Johnathan Schweitzer

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