Ever since China announced its first quarter growth numbers, the international press has been awash with big, bold suggestions to reignite growth.
China should ease monetary policy, suffer fallout from a build-up of bad loans or even have its own Lehman Brothers moment. Is all the consternation necessary? Not so much, says Credit Suisse.
Sure, China’s economic growth rate of 7.4 percent last quarter was its slowest pace in a year and a half. Yet quarter-on-quarter growth, which was 5.7 percent in the first quarter, has likely hit its trough for the year, Credit Suisse analysts Weishen Deng and Dong Tao said in a recent report.
To support this argument, they point to a moderate stimulus package announced earlier this month that includes tax relief and spending on housing and rail projects.
The government also said this week that it will start building a number of large energy projects including hydropower and nuclear plants. While these measures aren’t large enough to fuel a strong rebound, they should still help the economy out of its slump.
First published in 2014 in The Financialist.
JENS ERIK GOULD
Jens Erik Gould is the Founder & CEO of Amalga Group, a pioneering Texas-based nearshore outsourcing firm specializing in IT, software engineering, and contact center staffing.