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China misses 2014 growth target as IMF cuts global forecasts for 2015

Jan 20, 2015 at 3:12 pm in Market Commentary by contrarianuk

china flag

The eagerly anticipated quarter four 2014 GDP data for China was published earlier today and it painted a disappointing picture though broadly ahead of analyst expectations. The number came in at 7.3%, with total growth for 2014 at 7.4%, versus a government target of 7.5% despite an interest rate cut in November and incentives for banks in late 2014 to increase corporate lending.

Quarterly growth was the weakest in the Chinese economy since early 2009 at the peak of the financial crisis when it hit 6.6% and the annual growth was the slowest for 24 years.

Factory output rose 7.9% in December compared with a year earlier, versus expectations for a 7.4% and compared with 7.2% in November. Retail sales rose 11.9% in December from the same period in 2013 and marginally beating forecasts.

In the face of a weakening property market and sluggish demand for commodities it will be interesting to see what growth rate the government expects in 2015. The IMF today announced it was cutting global growth expectations for the next 2 years. It now forecasts 3.5% for 2015 and 3.7% for 2016, a cut of 0.3% in both years despite the sharp fall in the oil price as the eurozone continues to stagnate. So the global economy seems in reasonable shape but question marks remain about China and how far the government will go in holding up growth in the face of a slow down. With the Chinese stock market booming in 2014, private investors in the country believe that the good times are here to stay and with the government hugely influencing the economy it would take a brave man to bet that economic growth will fall dramatically. However it is clear that the best is probably behind China as the move from infrastructure building to consumption will take time and have plenty of bumps along the way.

Contrarian Investor UK

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