Schroders’ Wade: China slowdown to continue

Schroders chief economist Keith Wade believes the slowdown in China will continue, partly due to “zealous” central bank policy.

Some commentators have been encouraged by recent economic data from China, specifically to do with export and import numbers, with growth going to 5.1 per cent and 10.9 per cent for the month.

The export and import numbers beat market expectations by 2 and 1 per cent respectively, while industrial output rose 9.7 per cent year on year.

However, Wade is sceptical of growth returning this year for the biggest economy in emerging markets with the GDP falling to 7.5 per cent in Q2, from 7.7 per cent in Q1.

Wade says: “It is disappointing that there is little sign China is proving successful in its attempts to rebalance away from investment. The composition of growth was more heavily weighted towards investment than it has been since Q4 2011, at 4.1 percentage points, up from 2.3 .

“With credit squeezed and construction under pressure, this raises concern about the future sources of growth.”

Wade is also sceptical of Chinese central bank policy and its tightening in June. He adds: “A zealous central bank tightening in June has begun to feed through to the economy. We think a more measured and cautious approach will be taken in the future, but expect only small measures to counter the current cooling.”