China seeing a controlled softening rather than a hard landing for is economy and US Treasury Secretary says US GDP growth could stay at 2% per year for slower growth new normal

The mainland economy may bottom out over next few months, thanks to Beijing’s fine-tuning policy, as industrial production and consumption gathered steam last month and accelerated investment in infrastructure offset a deeper slide in the property market.

Economists expect Beijing to roll out more mini-stimulus measures, on the top of the recent moderate easing of money supply, in a bid to hold economic growth above the central government’s bottom line, which is believed to be somewhere below but close to the annual target of about 7.5 per cent.

Industrial production grew 8.8 per cent year on year last month, slightly faster than April’s 8.7 per cent, the National Bureau of Statistics said yesterday. Power generation rose 5.9 per cent, accelerating from April’s 4.4 per cent.

But the property market remained a major drag on economic recovery, with investment in the sector growing 14.7 per cent year on year in the first five months of the year, down from the 16.4 per cent growth between January and April.

Home sales value in the first five months dropped 10.2 per cent, while sales of office building units fell 14 per cent.

However, the weakness in the real estate sector was offset by strong infrastructure investment, which climbed 25 per cent in the first five months from a year earlier, accelerating from a 22.8 per cent increase from January to April.

Retail sales also posted stronger growth last month, up 12.5 per cent year on year compared with 11.9 per cent growth in April, driven by a surge in online sales, which soared 53.2 per cent.

Gerard Burg, a senior economist for Asia at National Australia Bank, said the mainland might see a “controlled softening” rather than a hard landing.

Forbes has an analysis of China’s economic prospects and the impact on the rest of the world if China has a serious slowdown.

There are many who predict economic doom for China. Stratfor’s George Friedman predicts an economic collapse by 2020.

In a speech to the Economic Club of New York yesterday, US Treasury Secretary Jack Lew said the US GDP growth rate, adjusted for inflation, is now projected to run a little above 2% a year. That would be a significant downshift from the 3.4% average growth rate from the end of World War II until 2007.

Look at it this way: If the US economy grows at its traditional rate between now and 2040, it would double in size to $37 trillion vs. just 50% growth to $27 trillion at the slower pace. And remember, that growth gap — $10 trillion in 2040 – is cumulative. It would persist year after year and get larger as time passes.

So what’s wrong? An excellent New York Times piece today by reporter Binyamin Appelbaum notes that while economist accept slower growth is partly the result of long-term trends, they also think the aftermath of the Great Recession and the Not-So-Great Recovery are playing a role. Among the former factors, you have (a) the demographically-driven decline in labor force participation and (b) an apparent productivity slowdown starting in the mid-2000s as the pace of technological innovation and diffusion has slowed.

If you liked this article, please give it a quick review on ycombinator or StumbleUpon. Thanks

Subscribe on Google News