Thursday, July 19, 2012

China: Challenges to economic growth noted

BEIJING, July 18 (UPI) -- China's slowing economic growth is "an uncomfortable ebbing," for the country, the official Xinhua news agency said Thursday.

Citing the second quarter's 7.6 GDP growth, a Xinhua news analysis said it was sharply down from 9.5 percent a year earlier and half a percentage point below 8.1 percent in the first quarter.

"Although the pace is still enviable for economies elsewhere, it marks an uncomfortable ebbing for China," the report said. "It was the lowest rate since the 2008-2009 global recession, when China's growth eased to 6.6 percent in the first quarter 2009 before a massive government stimulus package provided double-digit growth."

While the slowdown is partly due to global economic woes such as the crisis in the Eurozone and slow recovery in the United States, China's largest trade partner, Xinhua said it is also self-induced, as the Chinese government has sought to tame high inflation and ease runaway real estate prices.

While the government's policies have largely worked, "these efforts have coincided with the global downturn and domestic economic rebalancing, sparking concerns that the slowdown might be deeper than initially expected," it said.

"The ripple effect of slowing growth is beginning to weigh on enterprises' profitability, exacerbating their financial stress amid rising costs and dwindling demand, as warnings of lower profits or even losses set to overshadow the market in the coming weeks," Xinhua said.

The report echoed Chinese Premier Wen Jiabao's warning this week that the economy has not formed a stable recovery and economic difficulties may continue for some time.

The report said analysts worry relying on the government to increase investment to spur growth will set back efforts to wean the economy off its reliance on state investment, lead to the construction of unneeded factories and saddle the economy with bad debts.

Source: http://pheed.upi.com/click.phdo?i=6fbff6fdf4d0294de32c59b55f1d47a4

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