Can China Save The Global Economy From A Recession?

Zacks

It's no secret that the Chinese economy has substantially slowed in 2012. GDP growth is well below the double digit level it has been at the last several years coming in at just 7.4% in the third quarter.

There were fears that China was heading for a hard landing which some believed, with Europe also slow, would throw the global economy into a recession.

But a bunch of the October data is now out and it was better than expected.

  1. Factory output rose to 9.6% from 9.2% in September
  2. Retail sales were up 14.5% up from 14.2% in September
  3. Auto sales jumped 6.4% to 1.3 million which is a reversal from September which saw sales decline 0.3%
  4. Power generation grew 6.4% from the same month a year ago (but is still below the boom time levels)

October consumer prices also rose just 1.7%, down from 1.9% in September. Food prices jumped only 1.8%. It appears that inflation is under control which gives the Central Bank room to maneuver on further interest rate cuts.

The once-in-a-decade transfer of power within the Chinese Communist Party is starting to take place this week. Many expect a more aggressive economic policy to spur growth once the new leadership is in place.

It's likely we'll see China turn on a variety of stimuli and that GDP growth will surge back above 8% in 2013.

Could an economically resurgent China be the growth engine that saves the rest of the global economy from recession?

 

Zacks Investment Research



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