The economic downturn in China has been one of the biggest stories that have had the world economy at a fix for the better part of a year. It is the world’s second largest economy, and the declining domestic demand had led to anxiety among countries which are dependent on massive exports to the Asian country. Some key Chinese trading partners have suffered, and due to the added problem of the trade war with China, there were fears that the downturn would continue for the foreseeable future. However, in a fresh development, the Chinese economy recorded a steady growth in the first quarter of 2019 that must lead to a degree of optimism both among the nation’s policymakers as well as those who depend on the country’s robust economy to push their export items.
Despite forecasts of a bigger slowdown in the wheels of the economy, China recorded a growth of 6.4% and it is perhaps more important that the in addition to the growth, domestic demand and industrial output both showed an uptick. The key reason behind the rise in industrial growth seems to be greater investment in the area and despite the expectations from several quarters of a slowdown in industrial output, China has sprung a surprise of sorts.
Although this particular rise in growth does come as a pleasant surprise for investors and policymakers across the world, analysts believe that the recent figures cannot be looked upon as a sign that a long term recovery has taken place. The spike in growth is primarily due to the intervention of the Chinese state which decided to stimulate the economy through big ticket loans across the board over the past few months. Banks in China lent a jaw dropping $865 billion in order to trigger manufacturing and consumption in the country. Hence, it is fair to say that the recovery could well be a flash in the pan, rather than a long-term recovery. A senior economist stated, “We need more evidence to call a full-fledged recovery. Our view of the economy is still cautious. We think it is somewhat linked to the stimulus, but we can’t attribute it all to it.” Despite the scepticism, it is without a doubt a gratifying development, and it remains to be seen whether China can carry on growing at the same pace in the quarters to come this year. The next quarter is going to be key.
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