China’s Economic Slowdown

The slowdown of the Chinese economy was confirmed by the release of the GDP figures earlier this month, showing a growth rate of only 7.6 percent in the second quarter of this year, the slowest pace in three years and the sixth straight decline in the growth of the world’s second largest economy.

This prompted Chinese premier Wen Jiabao to warn that the nations’ recovery is yet to establish momentum. “It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” Jiabao said during an inspection tour in southwest Sichuan province this month, according to a Chinese language report from the official Xinhua News Agency, and as reported by Bloomberg News.

But projections for the nation’s expansion is likely to indicate that the economy has yet to bottom out as a Chinese central bank adviser now sees a cooling of the economy to 7.4 percent this quarter. Song Guoging, an Academic Member of the People’s Bank of China Monetary Policy Committee said at a forum in Beijing on July 21 that, he is “more pessimistic” about China’s growth rate as there are “problems on the export side.” He even added that “there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months.”

This week, the release of the HSBC Flash Manufacturing PMI is anticipated by the markets. In June, the country’s factory sector contracted for an eight consecutive month, with prices and export orders showing their weakest performance since early 2009. New export orders were reported to have fallen at their sharpest pace in more than three years. The indicator posted a revised reading of 48.2 points in the previous month, which is clearly in the contraction territory. Further signs of economic weakness in China could have a painful effect on the global economy, which is already suffering from a slowdown because of the European debt crisis.