THE LATEST MONTHLY economic data show China’s economy is steadily decelerating its pace of growth. This Bystander chooses that formulation rather than, say, ‘China’s economy faces slowing growth’ because managing the transition from double-digit rates of growth in the fast-growth industrialization phase of development to lower but more sustainable growth rates as the economy becomes less dependent on infrastructure-investment and export driven growth is now the primary task of policymakers.
We knew from last month that first-quarter GDP growth was lower than in any quarter since the third quarter of 2012. We take further encouragement from the new raft of numbers showing fixed-asset investment between January and April grew at its slowest since 2001, at 17.3%; new property construction fell 22.0%; and aggregate new credit fell to 1.55 trillion yuan ($249 billion) in April from 2.07 trillion yuan in March. These are signs that the country is adapting to what President Xi Jinping called a few days ago the “new normal” slower pace of economic growth.
Along with that comes a slowing of the growth rate of industrial output. Year-on-year, it was up 8.7% in April, down from March’s growth rate of 8.8%. That might in the past have been a cause to open the credit taps, especially as the most recent monthly consumer price inflation figures show inflation at just 1.8%, an 18-month low. But not, we believe, this time — and especially as there are still demons lurking in the background among the unsustainably high levels of corporate debt and industrial overcapacity, the ricketiness of shadow banking and a property bubble that is far from being safely deflated.