The worrying sign in the world's second larget economy
There is no doubt that Chinese economic data is questionable about its accuracy, is volatile in its monthly changes and is weakening based on a vast array of sector points in recent months. The decline in exports in March highlights my concern about the general lack of demand growth in the global economy with little improvement in Europe, Asia and the US in recent months. China has high debt, chronic deflation, a rising currency and very high real interest rates and it appears that Wednesday’s March quarter GDP growth rate is likely to be well below the around-7% target. The worrying sign in the world’s second largest economy is not the activity growth slowdown, but the eerie sense of calm amongst Chinese policy makers. It is clear to me that the People’s Bank of China will have to cut rates much more aggressively than even they realise, with -75 basis points of cuts required in the next six months to stabilise demand growth. (VIEW LINK)
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