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China’s Growth Still Within Reasonable Range

China’s Growth Still Within Reasonable RangeChina’s Growth Still Within Reasonable Range

China’s economic growth remains within a reasonable range as employment still holds up and household incomes rise, state television quoted Premier Li Keqiang as saying.

China’s favorable economic fundamentals have not changed and new growth drivers are emerging, it quoted Li as saying, Reuters said.

Global investors and policymakers have been on edge this year over the health of China’s economy, which appears set for its weakest performance in at least a quarter of a century.

A plunge in China’s stock market over the summer and a surprise devaluation in the yuan have roiled global markets, and raised doubts inside and outside China over Beijing’s ability to manage its economy.

  Industrial Profits Slump

Adding to concerns about a steep slowdown in China’s economy, profits at the nation’s industrial firms tumbled in August, logging the largest year-on-year decline since records began in 2011.

China’s industrial profits declined in August as product prices continued to decrease, the China’s National Bureau of Statistics reported Monday.

During the first eight months, industrial profits of the firms dropped 1.9% year on year to around 3.77 trillion yuan ($591.6 billion).

The drop was attributed to falling product prices, lower investment returns and foreign exchange losses contributed, He Ping, an official at the National Bureau of Statistics, said in an analysis on the agency’s website.

The report is a gauge of earnings from industrial companies that have 20 million yuan ($3.1 million) or more in annual “core business income”, according to NBS.

“Companies are facing enormous operational pressures”, said Liu Xuezhi, a macroeconomic analyst at Bank of Communications Co. in Shanghai.

China also devalued its currency by about 4%, a move largely interpreted as an attempt to boost sagging export revenues.

  Debt Explosion

China is facing a debt explosion of unprecedented proportions which may end in a full-blown crisis or a “lost decade” for economic growth, one of the world’s leading experts on the region has warned, Bloomberg reported.

Michael Pettis, finance professor at Peking University in Beijing, said that every “growth miracle” since the Second World War has ended either in financial collapse or stagnation–without exception.

He said the only thing that was different about China was that the scale of its imbalances was even greater than anything witnessed before.

The warning comes amid growing concern about the stability of the Chinese economy, following the plunge in its stock markets last month and the authorities’ unexpected decision to devalue their currency.

However, many are now worried about how sustainable that growth will be in the coming years.

The authorities in Beijing have pledged to meet a 7% gross domestic product growth target in the coming years–but Pettis reckons anything above 3-4% will be effectively impossible.

Financialtribune.com