China slower GDP growth ‘a clear sign of distress’

China’s Gross Domestic Product (GDP) growth slowed to 7.5% in the second quarter of 2013, according to economic data released on Monday.

The trend is a continuation of a significant slowdown period for the world’s second biggest economy.

GDP growth in the first three months of 2013 was 7.7%, itself a decrease from the 7.9% from the final quarter of 2012.

 Economist Ren Xianfang of IHS Global Insight told AFP, “As of now, China’s GDP has been staying under 8% for five straight quarters, a clear sign of distress.

“The rather sharp growth deceleration and the recent financial market turmoil indicate that risks have been building on both the financial and real goods sector.”

Factory output and investment have weakened, although retail sales rose to 13.3% year-on-year growth in June, from 12.9% in May.

Analysts had expected the slowdown as authorities in Beijing try to free China from dependence on exports to achieve more sustainable growth based on domestic consumption.

However, statistics suggest a consumer driven economy is still some distance away. Disposable income growth for urban households slowed to 6.5% year-on-year in the first half of 2013, down from 9.7% in the first half of 2012.

China’s leaders set a target of 7.5% GDP growth overall in 2013. This is higher than forecasts for Europe and the United States, but it would still be China’s smallest growth since 1991.

In April, Peking University professor Michael Pettis said that the Chinese government have to slow economic growth before unsustainable debt levels spiral out of control.

He said, “The good news is that Beijing’s economic policy makers are well aware of this problem and are trying to deal it. As a result, I think we will see a slow-down in the economy which will last over the next two-to-three years.”

 The Chinese government has also shown willingness to address the environmental issues raised by its massive population and economy. It recently signed a deal with the US to cut carbon emissions from heavy-duty vehicles and coal-fired plants.

Further reading:

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US and China to co-operate in tackling greenhouse gas emissions