The release of China’s fourth quarter GDP along with retail sales, urban investment, and industrial production yesterday left traders in no doubt that the world’s second biggest economy was slowing at the end of 2015.
The big question, the important one for China’s currency, stock markets and traders globally, is how far and how fast the slowdown has become.
Westpac economist Eliot Clarke summarised the concerns in a note after the release of GDP, saying:
Overall, the loss of momentum evident in the nominal series is a disappointing result, one that emphasizes the need for further policy accommodation to stem the weakness in investment and support continued momentum in the services sector as we head into 2016.
Just how far and fast the economy slows is an open question.
David Flanagan, director of interest rates at Curve Securities, told Business Insider that the big positive from the GDP data was “clear signs that the Chinese economy is making the transition away from its export-led growth strategy with services share of the economy growing”.
But he also said there is a strong chance that the Chinese economy continues to slow from here. Flanagan pointed out that the Chinese leading indicator of economic growth has continued to fall and is currently sitting at a level consistent with a 6% growth rate.
Flanagan warned that unless authorities in Beijing take measures, such as lower interest rates, a reserve ratio cut and fiscal stimulus, the Chinese economy will continue to slow across the course of 2016.