Chinas growth is slowing down – Asian markets unaffected

JPN_Hero_Prospect_China

The Chinese economy continues to slow down. Industrial production growth slowed to 6.0% YoY, retail sales grew by 10.2% and fixed asset investments by 8.1% - figures that European countries can only dream of at the moment, but there are different measures applying to China. A lot is expected from China as a driver of global growth and before the global financial crisis there was only one direction –upwards. The growth rates have slowed since then, so that the figures published today, however good they might be for any other country, tend to be disappointing. The figures not only fell below the expectations of the analysts surveyed by Bloomberg, but, what is more concerning, they have now reached a level that we have not seen since the early 2000’s. We will have to adapt to this new reality, like it or not.                     

Although the figures were worse than expected the stock markets in the Far East reacted contrary. The Chinese CSI 300 closed at its daily high – up 1.88% and the Nikkei closed up 1.1%. The reason for this? Based on these figures the market expects a further policy easing and large investments in infrastructure projects. Therefore, we continue seeing what has become normal since the outbreak of the financial crisis – the reality is being simply washed away by the hope for even more investments. I only hope that we will not be hit hard by the reality one day!

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.