Editorial | Confidence central to lifting China economy out of the doldrums
- Mixed signals provide an opportunity for some stimulus when stability is paramount, but concerns of consumers must be allayed
Slower growth suddenly has everyone fretting about the Chinese economy. There is the usual forecast of economic headwinds, but they do not seem insurmountable, especially when compared with the expected anaemic growth across the euro zone and Britain.
After a stellar comeback in the first quarter with the lifting of draconian Covid-19 controls, growth has faltered somewhat in recent weeks.
Credit growth figures last month fell short of forecasts as weak real estate, which is still struggling to emerge from a long slump, weighed down consumer sentiment. Export growth has slowed but the services sector has stayed strong, with restaurants and other businesses reopening.
Meanwhile, factory activity and foreign trade are weak, and construction will be constrained so long as the property market is down. Inflation is muted.
So, it is a mixed picture, but hardly the end of the world. There remains ample policy space and growth potential.
Some stimulus efforts are warranted, but there is no need to bring in the proverbial bazooka to prop up the economy. In response, the nation’s central bank has just cut a key policy rate in a clear signal of monetary loosening.
