subject: Morgan Capital & Researchs Analysis For China Artificially Slowing Down Of Their Economy. -by Ja [print this page] According to Morgan Capital & Research,Chinas inflationary forecast, the research company states that China is doing their best to reduce inflation rate. China has to artificially reduce economic growth to prevent the economy from overheating prematurely. Morgan Capital & Research, praise the Chinese government for their precise control and their prompt decision to withdraw the stimulus. If the Chinese government hesitates in stepping in to control the situation, we would see a premature overheating of the economy which will only result in the next downturn in China.
By Geoff Dyer in Beijing
The Chinese economy expanded 11.1 per cent in the first half compared to the same period last year, pointing to a considerable slowdown in the second quarter of the year.
No figures were made immediately available for second-quarter growth, but the number for the first six months was a step down from the 11.9 per cent rate posted for the first quarter alone. That strong figure reflected the impact of the huge monetary stimulus that Beijing launched in late 2008 as a result of the global financial crisis.
The difference between the January-June and January-March numbers suggested that activity slowed significantly in recent months after the authorities introduced measures to try and cool the housing market.
Clear signs of a slowdown in the economy, the result of a withdrawal of stimulus since late 2009, are nothing to panic about, said Stephen Green, economist at Standard Chartered, in a note just before Thursdays figures were released. So far the data suggests a soft landing for growth.
Mr Green added that Beijing was likely to relax policy again from the fourth quarter of the year, as signs of decelerating activity gather pace in the coming months.
The Chinese authorities are confident they can engineer a controlled slowdown. But the emerging signs of economic weakness over the last two months have unnerved many investors who are hoping that robust growth in China can help sustain the global economy amid new signs that Europe and the US could falter.
The impression of a significant slowdown was reinforced by a sharp drop in the year-on-year growth of industrial production in June, falling to 13.7 per cent from 16.5 per cent in May.
However, the weaker activity also appears to have curbed the recent surge in inflation, with the consumer price index falling from 3.1 per cent in May to 2.9 per cent in June and factory-gate inflation down from 7.1 per cent to 6.4 per cent.
The pace of new lending has been slowing since last autumn but the main tightening measure has been the campaign since mid-April to try to limit speculation in the property market, with measures including new restrictions on mortgages for second homes.
The government has also tried to limit the flow of loans to the investment companies operated by local governments which were behind a significant proportion of new infrastructure projects started last year.
However, at the same time, exports and consumption have remained robust, with the government announcing on Thursday that retail sales grew 18.3 per cent in June over the same month last year. Exports rose 44 per cent in June, year-on-year.
The official China Securities Journal said in a front-page editorial on Thursday that the government should extend active fiscal policy and refrain from further tightening to prevent a sharper slowdown.
In the second half of the year, external demand will gradually weaken and the dividend from the trade surplus will fall. This requires an increase in overall social investment and a halt to tightening of both fiscal policy and monetary policy, the paper wrote.
China publishes growth figures on a year-on-year basis but does not release a sequential, seasonally-adjusted growth figure which would give a more accurate impression of the direction of economic activity.
