By most measures China’s economy has slowed
quickly since the last quarter of 2011. Electricity production, the
National Bureau of Statistics reports, grew 1.7% in April and May from
last year.
Over the past decade the annual growth rate was 12%. Also in April and
May, the railroad ton-kilometer figure grew by 1.3% compared to the same
months last year, down from the 6% growth seen from 2005 to 2011.
Due to the resulting decline in commodity prices, the inflation
situation has improved, which lessens pressure on the household sector.
At the same time, the slowdown has not caused widespread reduction in
employment. There may be some impact on construction jobs already, but,
as the labor market was very tight before the slowdown, the employment
picture remains healthy.
There are no widespread bankruptcies. The main reason for this is
government-owned banks not foreclosing on delinquent businesses. Of
course, banks may have more bad assets down the road, which is the cost
for achieving a soft landing.
State-owned enterprises reported 11% growth in sales but 10% decline in
profits in the first five months. Private enterprises may have fared
worse. It appears that the slowdown has impacted government revenue and
business profits rather than labor income.
Asset markets have fared badly this year. The stock market is depressed.
Despite some pickup in the last two months, the property market is
depressed and may remain so for several years. As the slowdown
disproportionately hits business profits, asset prices will likely
remain depressed.
Read more: http://www.marketwatch.com/story/dealing-with-a-double-whammy-in-china-2012-07-02?siteid=rss&rss=1
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