Chinese Growth will Miss Estimates this Year

22 Feb

I have grave concerns on this reliance that China’s growth will not be effected by the global events. I personally cannot see how there would not be an effect :-

  • With all developing economies, there are changes as the associated working population becomes wealthier;
  • local demands for goods, services and types of food changes
  • change to the structure in relation to imports and exports
  • Who is buying China’s exports? If these economies are growing at a slower or even shrinking, is China not effected?

An adviser to the Chinese government has warned that the world’s second largest economy could still fall to a ‘hard landing’ this year, in a worrying signal that contrasts with growing optimism among other economists that such a damaging scenario will be averted. The message from Chines is growth will slow in a controlled way ahead of a leadership transition later this year. A hard landing would show that the Chinese authorities have not managed to gradually slow growth, and would have a huge impact on the global economy.

In addition, Fidelity’s Anthony Bolton has warned Chinese GDP growth will come in at around 7.5% this year, undershooting consensus forecasts for growth of between 8% and 8.5%. Anthony Bolton, manager of the £558m Fidelity China Special Situations Investment Trust is one of the most successful fund managers over the last 3 decades. I am a great believer that when Anthony Bolton speaks I listen and he was warned emerging markets are not immune from headwinds facing Western economies.

He has stated that he expects the Chinese authorities will put the brakes on growth, bringing in further tightening mechanisms this year which will lead to a reduction in GDP growth.

“China will continue tightening to slow down its economy as the policymakers know the country is not immune from the troubles which are facing developed economies,” said Bolton.

Regional data has shown a slowdown is taking place, with China’s economy growing at 8.9% in Q4 2011, which shows the slowest pace of growth in more than two years.

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