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The Big Splutter

By Cong Mu (Global Times)

08:28, July 23, 2012

No hard landing for Chinese economy.(Photo/Xinhua)

It was the first time China's economic growth rate dipped below 8 percent since the onset of the global economic crisis in 2009.

China's GDP growth for the second quarter of 2012 came in at a sluggish 7.6 percent year-on-year, slightly above the 7.5 percent annual growth target and dragging down the first-half growth rate to 7.8 percent, according to the National Bureau of Statistics (NBS) on July 13.

The significant slowdown was due to weak industrial production and fixed-assets investment (FAI), according to the Asian Development Bank (ADB).

The economic data released in May surprised the market on the downside, with industrial output growth in April falling to 9.3 percent year-on-year, well below the market expectation and annual target of 11 percent. The industrial production growth rate continued to underperform in May and June, recording 9.6 and 9.5 percent year-on-year respectively.

Other production indicators, including power generation and daily output of processed crude oil, were also extremely weak in April. Media reports in June saying that coal was overstocked in Qinhuangdao port in North China's Hebei Province evidenced that electricity demand was declining.

From January to June, the country spent 15.1 trillion yuan ($2.4 trillion) in FAI, up 20.4 percent year-on-year. By contrast, the FAI increased 25.6 percent in the first six months of 2011. Foreign direct investment (FDI) has been slowing down as well.

Consequently, the ADB last week revised down a prediction for China's 2012 growth to 8.2 percent from 8.5 percent, and for 2013, to 8.5 percent from 8.7 percent.

The Chinese government has taken measures to prop up the falling economy by approving new railway, highway and other big-ticket projects.

A breakdown of the FAI shows that State-owned enterprises have been leading an increase in investment, particularly in June, boosted by government-led infrastructure construction, according to analysts.

Both Premier Wen Jiabao and Vice Premier Li Keqiang highlighted over the weekend the need to continue stabilizing the economy, facing weakening external and domestic demand.

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