This summer China mounted an all out offensive, putting American dominance to the test in the process. Over the course of a two week war, battles have been won and lost. Whether on land or in the water the intensity of the challenges has not faltered, and each day the two nations seem to be reversing who is coming out on top. As it stands the U.S is on the verge of triumph, but with the end of the skirmish still days away it could all change. For the past four years the Summer Olympics have belonged to the U.S, but at just two gold medals ahead a final push from China could see them emerge from the arena triumphant.
Whilst the sporting outlook for China is good, the country’s economic outlook has taken another knock.
There have been further signs that the global economy is weakening as reports indicate that in July China’s export growth floundered whilst imports and new yuan loans were behind estimates. The customs bureau in Beijing stated that imports experienced a 4.7 per cent rise on the previous year whilst out bound shipments only increased 1 per cent, China’s lowest rise in industrial output since 2009. Meanwhile, separate reports demonstrated an unexpected deceleration of industrial output growth to 9.2, and a rise of 13.1 per cent for retail sales. Both numbers failed to meet analysts’ expectations. Following this, the Central Bank asserted that new local-currency lending was down from 919.8 billion yuan in June. July’s figure was 540.1 billion yuan, lower than the 30 figures forecast in the Bloomberg news survey which came up with a median estimate of 700 billion yuan.
Yesterday’s data was the latest indication that the interest-rate cuts and rapid investment project approval already implemented by the Chinese government have yet to accelerate growth.
The uncertainty of the euro-zone could be perceived as significantly contributing to these figures. Last month China’s sales to countries within the European Union fell 16.2 per cent. However, customs data has also shown that growth in U.S. exports experienced a considerable drop, down to 0.6 per cent from 10.6 per cent in June.
Although government representatives are maintaining a confident stance, China is now dangerously close to missing it’s aimed for 10 per cent trade expansion for 2012. The odds that the second largest economy in the world will be slowing down for a seventh quarter are increasing, and with Asian stocks sliding at the news it now seems more likely than ever that the government will be pushed into intensifying expansion boosting methods. After the release of the new lending data China’s Shanghi Composite Index of stocks fell 0.3 per cent whilst the MSCI Asia Pacific Index (SHCOMP) of stocks reported a decline of 0.8 per cent.
The Australia & New Zealand Banking Group’s head of Greater China Economics, Liu Li-Gang, expressed the belief that the government may take immediate action, perhaps even lowering banks’ reserve requirements within the next few days. He stated: ‘Monetary policy easing has to be more aggressive in the remainder of the year.’
Head of Greater China Economics at Bank of America Corp. Lu Ting had similar sentiments, declaring that the likelihood of government intervention in the form of stimulus or policy easing is ‘surely on the rise’.
With inflation cooling for a fourth consecutive month in July the central bank now has more breathing space in which to ease monetary policy.
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