China Q2 GDP set to show worst economic performance in 3 yrs
2012-07-06 15:17:00
Chinese economic growth probably slipped to its weakest pace since the 2009 global financial crisis in the second quarter of 2012, with the central bank's stimulus announcement for a second time in two months seen as a sheer acknowledgment of a slowdown in the world's second largest economy, which once steered the globe out of recession.
The gross domestic product is expected to rise 7.9 percent in the second quarter, the weakest pace since 2009. The economy grew at an annual rate of 8.1 percent in the first quarter. The estimated growth rate is only a tad above the government's target of 7.5 percent.
The data is scheduled for release at 10 pm ET on July 13. The National Bureau of Statistics is expected to publish retail and industrial production figures on the same day. Also, the inflation and trade data are due on July 9 and 10 respectively.
Consumer price inflation is expected to recede further in June, with economists forecasting an inflation of 2.3 percent, down from 3 percent in May. Exports have been slowing for quite some time, reflecting weak demand in Europe, which is one of China's biggest markets.
In a surprise move on Thursday, the People's Bank of China lowered the one-year deposit rate by 25 basis points. The one-year lending rate was reduced by 31 basis points. The new rates will come into effect on July 6.
The latest move comes just a month after the bank announced its first rate cut since late 2008 on June 7, when the one-year deposit rate was reduced to 3.25 percent from 3.50 percent. Earlier, China lowered the reserve requirement ratio by 50 basis point in May after a similar move in February.
The interest rate cut suggests that policymakers in China are increasingly rattled by the state of the economy, said Mark Williams, Chief Asia Economist at Capital Economics. The move's loosening impact will be amplified by the decision to increase the discount to the benchmark lending rate that banks can offer borrowers, Williams said.
The economist expects at least one more cut to benchmark rates this year and another RRR cut this month to be followed by two more before the end of the year.
China's State Council said in May that the economy is currently facing "increasing downward pressure." It also vowed to accelerate the process of fine-tuning policies to achieve more stable growth
The World Bank expects China's economic growth to ease to 8.2 percent in 2012 from 9.2 percent in 2011.