Home > Development Economics, Inflation, Interest Rates > China has plenty of ammunition to stimulte growth

China has plenty of ammunition to stimulte growth

With industrial production down and significantly less pressure on inflation the Chinese authorities are in a good position to throw some more fuel on the fire. The National Australia Bank reported that China’s Industrial Production for July rising by 9.2%yoy, down from 9.5% last month and below the median forecast of 9.7% – see graph below.

However this growth is not bad when you think of other primary producing countries. Furthermore the CPI rose by only 1.8% this year (July yoy) and down from 6.5% in 2011 so there is little pressure in this area.

The worry for China is their trade balance which has dipped. This was very disappointing export growth coming in with a rise of 1% over the past year, down from 11.3% last month and way below the median forecast of 8.0%. There was a big fall in exports to Europe, down by 16.2% over the past year (-1.1% in June). Exports to Italy are down by 35.8%. There was also a significant pull back in exports to the USA rising by 0.6%, down from 10.6% in June. Exports to the rest of Asia were better but have slowed everywhere. For Australia, exports rose by 8.5% yoy, down from 18.6% yoy last month. Meanwhile, imports slowed to 4.7%, from 6.3% last month and below the market forecast of 7%. Imports from Australia into China fell by 9.7%yoy, down from a rise of 1.7% for June.

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