2015-01 China's economy is slowing down

Last month the Chinese stock market fell dramatically, as investors became concerned that growth in China is slowing down. This article summarizes the most recent data.

• GDP may grow by less than 7% in 2015, the slowest since 1990

• Both imports and exports are falling, showing weak demand both in China and abroad

• Investment in fixed assets grew by 10.9%, slower than the expected 11.1%

• But retail sales grew by 10.8%, faster than expected 10.5%

1. Some notes on these numbers

• The Chinese economy grows incomparably faster than economies of developed countries

• Data are never simple: some things are better, some worse, and figuring out what is happening is not straightforward.

• A lot of attention is put on small deviations from expectations

2. The article also talks about macroeconomic policy:
"China’s central bank has lowered interest rates five times since November and has repeatedly relaxed banks’ reserve requirements in an effort to put a floor beneath the sputtering economy.[...]Further policy easing is widely expected in coming months, and the government is also trying to increase investment in infrastructure projects to support growth."

• To stimulate the economy, the central bank lowers interest rates. This is monetary policy.

• In addition, in China reserve requirements are lowered (there are no reserve requirements in Canada)

• Investment in infrastructure is another way to stimulate the economy. This is fiscal policy.

3. Finally, there is a point which shows that China matters and it affects other countries:

"Fears of a global economic slowdown led by China have roiled markets worldwide in recent weeks, prompting speculation that the Federal Reserve may hold off on raising interest rates this week."

The Federal Reserve (the US central bank) is making its policy decision this week. They were planning to raise the short-term interest rate (the Federal Funds rate). But, given the events in China, they may delay the increase.

By the way, the rate has been between 0% and 0.25% since the end of 2008.