Whatâs Going On Here?Data out on Monday showed that Chinaâs economy grew at its slowest pace in a year last quarter, as last yearâs teacherâs pet suddenly falls out of favor. What Does This Mean?China mightâve outperformed the rest of the world last year, but this year has brought a whole host of challenges for its economy. Energy shortages, for one, have led to surging prices and power rationing, which has pushed factories to cut production and led to a drop in manufacturing activity. The governmentâs much-discussed crackdown on the real estate market, meanwhile, has really slowed the property sector down â no small thing considering property-related activities make up nearly a third of the Chinese economy.
All that might be why the countryâs economy grew just 4.9% last quarter compared to last year â well below the 7.9% of the quarter before. Investment banks, for their part, saw it coming: data out last week showed that 10 of the 13 major banks have been cutting their full-year growth forecasts for China since August. Why Should I Care?Zooming in: Donât expect a helping hand.
Things arenât all bad: Chinaâs exports grew 28% last month compared to the year before, while consumer spending grew by a better-than-expected 4.4%. The government might be holding out hope that this will be enough to keep its recovery on track for now, which could explain why it isnât rushing to bring in any financial support programs.
The bigger picture: EMs break with tradition.
Chinaâs fellow emerging markets (EMs) arenât doing much better: Bank of America is forecasting that the group of them (excluding China) wonât grow as quickly as the US next year â the third year in a row thatâs happened (tweet this). This wasnât the plan: EMs â which have a lot of scope to come on in leaps and bounds using advancements from around the world â traditionally grow faster and offer higher potential returns than more developed markets. | 