China's growth rate drops

Updated: 2012-07-13 13:31

By Zhang Yuwei in New York and Chen Jia in Beijing (China Daily)

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China's growth rate drops

A laborer holds a shovel as he looks on at a construction site in Beijing's central business district on Thursday. China's economy grew 7.6 percent in the second quarter, the slowest since the first quarter of 2009. Jason Lee / Reuters

China's economy reported 7.6 percent growth in the second quarter, the lowest since the first quarter of 2009 during the global financial crisis.

The National Bureau of Statistics said on Friday that in the first half of the year, the country's economy grew by 7.8 percent to 22.71 trillion yuan ($3.56 trillion). The growth in the first quarter was 8.1 percent.

China's manufacturing, foreign trade and investment have been slowing down this year, triggering worries about a hard landing of its economy. The country's economic role has become more important as the eurozone continues to struggle with the debt crisis, the US is still on the way to recovery, and emerging economies such as India and Brazil are also slowing down.

China's central bank has cut the interest rates twice this year to stabilize growth. Premier Wen Jiabao also vowed to maintain a stable economy, speaking during recent visits and major conferences.

Leo Abruzzese, global forecasting director at the Economist Intelligence Unit, which conducts extensive research on China's economy, believes the Chinese government's attempt to slow down the economy is also a way to cope with the global economy, when both Europe and the US are experiencing financial problems.

"If the (Chinese) government were to stimulate the economy hugely, the way it did a few years ago, that probably would be the worst thing they could do," said Abruzzese, adding that it should be done moderately.

China's growth has been relying on investment and exports, he said, and the government should increase domestic consumption.

Derek Scissors, a senior research fellow at The Heritage Foundation, said China has raised the average of world economic growth in almost every year of the reform period. It can contribute more by rebalancing the economy away from investment and toward consumption.

"If China's GDP growth slows but it also rebalances, that is a much greater contribution to the world economy than fast, unbalanced growth," he said.

Scissors expected China to announce GDP growth of 8.2 percent for the full year of 2012.

"However, the days of announcing 10 percent growth or higher are over. For a few years, the range is likely to be 7 to 8.5 percent, then it may get slower. This is natural," he said.

But Sebastian Mallaby, director of the Center for Geoeconomic Studies, believed China will deliver further fiscal stimulus, both to support its own growth and to contribute to global demand.

"At a time when the eurozone is in trouble, US fiscal stimulus has been pushed as far as it can be, and growth is weak in Japan, India, Brazil and other important economies, the world needs stimulatory policies from major economies that have a strong enough financial position to deliver them safely. China should lead in this respect," he said.

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