This article was originally published on Business Times
There seems little doubt that China is entering a period of slower growth. From the top line level, the headline GDP growth rate in Q1 has been reported to decrease to a new lower level of 8.1%, which is unseen since 2008. China’s premier Wen Jiabao also lowered the government’s economic growth target to 7.5% back in March, the first time in the last 8 years.
On more micro levels, different data series seem to confirm such a trend as well. For example, the HSBC China PMI has been indicating a slowdown in the manufacturing activity for at least the past six months. The national power consumption growth and the railway freight growth, both the closely watched indicators which arguably give a better gauge of Chinese economy’s real picture, also have been declining since the beginning of the year.
In addition, the pain is also felt on the local level. During a trip of mine to China last week, for example, I was told by a regional manager of an Internationally renowned luxury automobile company that they are seeing the sales of this year to plummet dramatically compared to last year and he was even instructed by his superior to lower their cost either via reducing their wage bills (for at least 20%) or cutting their overheads. Another law firm partner concurred by indicating that their advisory and consulting business to multinational companies in Shanghai and Beijing saw a drop of revenue for at least 30% this year compared to last year. Read the rest of this entry »