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China: Tracking a Modest Recovery (III)
- In sum, the PMI data for April show Chinese industry (and by extension: the economy) still in the early (and seemingly vulnerable) phases of a modest expansion cycle. More data will be needed to verify whether the negative tone of this particular month is part of a trend. [private]
- What seems increasingly clear, however, is that even if a recovery is underway, it lacks (domestic) energy and is excessively reliant on external demand at a time when such demand is in question, and thus, it is almost certain that macroeconomic policy will, in the months ahead, need to support consumption to a larger degree.
- In the absence of such policies, it is possible for China to grow near the 7.5% target this year if the U.S. recovery does not stall and Europe does not worsen, and if the rest of the large emerging markets, such as Brazil, India and Turkey, manage to rebound. But to reach into the 8%-to-8.5% range (on average during the next 12 months) China’s real GDP growth will probably require either a positive upward surprise in the global economy or a more decisive growth push by policymakers.