China: Annual growth falling to its lowest rate since more than a decade with risks tilted to the downside
Global & Regional Focus Notes
12 September 2012
• A weaker global economic environment, a policy induced correction in the real estate market and a structural shift towards domestic demand led the Chinese economy to a gradual slowdown for six consecutive quarters. • Following dismal economic data so far in the third quarter, China’s second-half recovery looks to be on hold. The data underscore risks that the full-year growth rate may slide to its lowest in more than one decade.• The government seems to accept the continued downward adjustment of growth expectations, since a more moderate performance of the Chinese economy is healthier and more sustainable. However, insufficient policy support could create significant downside risks to growth. • We expect policy loosening to become more visible in the next few months, with the impact on the real economy to be felt only gradually. Therefore, growth is most likely to stabilize rather than recover in the second half.