Fitch: China slowdown slower than 2008
Fitch Ratings claims the current economic slowdown in China is slower than that experienced in 2008 and is likely to lead to a milder policy response.
The rating agency has already anticipated a China slowdown, forecasting real GDP growth of 8% in 2012, below the 10.5% average between 2007 and 2011.
“We do not anticipate as aggressive a response to the current slowdown as that in 2009, which initiated a rapid expansion of the amount of debt in the Chinese economy,” it reports. “The pressure for this debt to move on to the sovereign balance sheet is reflected the negative outlook on our ’AA-’ local-currency IDR [issuer default rating].”
It adds: “This is partly because the labour market is stronger than it was in 2009, and partly because we expect the Chinese authorities to be mindful of the risks associated with a further rapid expansion of credit. Policy will be eased only gradually to avoid stoking inflation and house prices.”
However, the agency says stimulus is expected “to head off a spil-over from the global economy into domestic demand”, which makes it believe China could avoid a “hard landing”.
The results of the HSBC Flash PMI index revealed a slower drop in the prospects for the Chinese economy, with Hongbin Qu, chief economist for China & co-head of Asian economic research at HSBC, adding that “decisive policy stimulus” was likely.
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