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The Upside to the Surprise China Slowdown


It could be the best bad news we've gotten all week. I'm referring to the lower than expected 7.6% GDP figure for China, which marked the slowest growth in 3 years and the 6th consecutive quarter of decline. The silver lining to this clunker is that it all but clinches more intervention from Beijing.

"This is a believable GDP number but I was very surprised. I was expecting the Chinese government would try to push a higher number, somehow manipulate it higher than 8% to get to that 8.1%," says Hilary Kramer, founder of GameChangerStocks.com and a veteran analyst, trader and fund manager. "The market really was happy with 7.6%, because there was some credibility behind but it also told the world that China will step in, and make sure to step up the fiscal spending, the regulation and the policies to jump start the economy."

However, there is still plenty to worry about.

"We need to pay attention to other important numbers," Kramer says, warning that a sharp decline in imports reflects stress on the country's growing middle class. Large swaths of rural unemployed that are going uncounted, as well as the recent weakness of some high-profile multi-national stocks, such as Caterpillar (CAT) or Cummins (CMI). She thinks these issues are merely the front end of what is expected to be a spate of turbulence.

"Wait for earnings and to hear the bad news that will shock the market," she warns. "If they breakdown enough, I think you do get in, because China will repair itself."

In the meantime, the China impact is clearly taking a toll on the region too, where South Korea just lowered its full-year growth target for the third time to 3%, while Singapore posted a surprise contraction if 1.4%.

Still, as important as the world's second largest and fastest growing major economy is, it would be hard to argue that the central planners in Beijing are not aware of the situation.