Freya Beamish, economist at Lombard Street Research, says Yes.
The Chinese authorities are in no man’s land. They have accepted slower growth but are not yet ready to go for the financial and wider reforms that would usher in a new phase of expansion.
We calculate our own Chinese GDP numbers. Our estimate shows that growth is even weaker than what the government has admitted to.
The economy likely grew at around 1.5 per cent in the last quarter, and domestic demand increased just 0.7 per cent.
Reform or not, China could have a serious global shock up its sleeve. Without reform, China is facing a major debt crisis.
On the other hand, with global currency wars already being fought, China may soon be forced to join the FX battle. If China’s authorities have the stomach for it, capital account liberalisation could help China gain an export boost, as the ensuing capital flight helps to devalue the yuan.
Yesterday’s GDP figures will further prompt the authorities to consider this option.
Mark Williams, chief Asia economist at Capital Economics, says No.
China’s slowdown is positive for the rest of the global economy.
It has contributed to big falls in commodity prices that have left most major economies better off. And because the economy has doubled in size in the past five years, its markets remain a significant source of demand for the rest of the world – even at their slower rate of growth.
Most importantly, the structural changes leading to slower growth in China are reducing the risk of a hard landing in the future.
There’s not even much evidence that the slowdown is causing widespread distress within China.
The property sector might be reeling after years of over-investment, but the rest of the economy is doing well. Incomes are still growing at a rapid rate.
The government has already beaten its target for job creation this year. Consumption growth is stable.
Should they wish to stimulate demand, Chinese policymakers have options – but it’s not clear why they’d want to.