Rocky road ahead for sputtering China – by Brian Milner (Globe and Mail – March 6, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

China has cut its growth target for this year by half a percentage point to about 7 per cent, a level that would mark its slowest expansion in a quarter of a century.

It also ought to dispel any notion that its leadership can engineer a fairly smooth economic transition toward the greater manufacture and domestic consumption of higher-value goods without serious growth hiccups and heavy state intervention.

The less optimistic outlook makes sense for a government that typically does whatever is necessary to meet – and preferably exceed – its publicly avowed goals for the economy.

The technocrats have known for some time that the sputtering economy has no chance of exceeding 7 per cent growth this year, and that it may take considerable data massaging (a government specialty) just to reach the lower bar. Major headwinds include continued weak demand in key export markets, serious manufacturing overcapacity and a bubble-ridden property market teetering on the brink.

“The downward pressure on China’s economy is intensifying,” Premier Li Keqiang told about 3,000 delegates attending the annual gathering of the Chinese parliament, the National People’s Congress.

“Deep-seated problems in the country’s economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year.”

Although a handful of China watchers concur with the revised target, the International Monetary Fund pegs growth this year at 6.8 per cent and other analysts are more bearish.

“Meeting even the reduced targets for 2015 would require a substantial improvement in economic conditions compared to the second half of 2014, making their realization unlikely,” says Brian Jackson, IHS Global Insight’s China economist. He expects GDP to rise by no more than 6.5 per cent.

For the rest of this article, click here:!-655258862/?ts=150306140414&ord=1