Graph of the week: Chinese slowdown

These past few months markets have been spooked by fears of a crash of the Chinese economy. However, while China is clearly slowing down, the risk of an actual crash remains limited. Chinese bears (pandas) see things too much in black and white…

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China published its Q3 GDP numbers this week, showing 6.9% growth over the Summer months. This is a remarkably strong number in light of all the recent concerns about the state of the Chinese economy. As usual, there are serious doubts about the reliability of these numbers. As such, the Q3 growth number is almost certainly overstated.

To avoid the question marks linked to Chinese data, it is better to look at data that give an indication about the Chinese economy, but that are produced outside of China. Data on Japanese or German exports to China or commodity prices are useful in this respect. At the moment, these data paint a consistent picture of a Chinese economy that is slowing down and is somewhat weaker than the official numbers. Importantly, they do not give any indication that the Chinese economy is crashing.

This is likely to be the story for China for the next few years: further economic slowdown with the authorities making sure that an actual crash is avoided. This implies that concerns about the Chinese economy will continue to linger, but that recent market fears are probably somewhat overdone.

It’s not a black and white story…

This article was written by Bart Van Craeynest

on 23 October, 2015 about China, Emerging Markets, Financial Markets

On completion of his studies in economics at UFSIA, Bart Van Craeynest started work as an economist in the financial sector. In this capacity he has been following economic developments in Belgium and internationally and the impact of the latter on the financial markets for over 15 years. Following a long period at a large bank, he became chief economist at a Belgian financial institution in 2010. Bart Van Craeynest has held the position of chief economist at Econopolis since 2015. He is co-responsible for the economic line of the house and hence closely involved in developing the investment strategy.