China’s 2012 growth target at risk

BEIJING: China’s annual growth target for 2012 looks increasingly in jeopardy as demand at home falters and Europe’s debt crisis worsens, complicating matters for Beijing as the country heads into a once-in-a-decade leadership transition.

The slowdown in the world’s second-largest economy could be more entrenched than expected as Beijing’s property tightening measures dilute the impact of any fresh policy stimulus, diminishing China’s ability to offset faltering demand in Europe and the United States, according to Reuters.
“I cannot see a bottom in economic growth. The general slowdown trend may not change anytime soon,” Shi Xiaomin, vice president of the China Society of Economic Reform, a government think-tank in Beijing, told Reuters.
HSBC’s flash PMI showed China’s factory sector shrank for an eighth straight month in June as export order sentiment hit its weakest level since early 2009, indicating the economic trough may extend well into the third quarter.
“The economy is definitely on a downward slope,” said Gao Shanwen, chief economist at China Essence Securities in Beijing.
Gao expects annual GDP growth to hover between 7-7.5 per cent in the second- and third-quarter, before a modest recovery towards the year-end as policy stimulus gains traction.
Premier Wen Jiabao in March cut the 2012 growth target to 7.5 per cent, which if realized would be the lowest since 1990.
While that target was seen as typically conservative for Chinese leaders, global conditions have deteriorated sharply since then, with much of Europe now facing a prolonged recession and the US economy appearing to be losing steam.
Analysts forecast in a Reuters poll in May that China would deliver second-quarter economic growth of 7.9 per cent from a year earlier, with full-year growth of 8.2 per cent, which would be the lowest since 1999.
But weaker domestic and overseas data since then has prompted some to cut forecasts and many analysts now believe second-quarter growth could be just over seven per cent. In early June, the central bank surprised markets by cutting interest rates for the first time since 2008 to combat faltering growth.