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No fear of a major economic slump this year

china.org.cn / chinagate.cn by He Weiwen, February 4, 2016 Adjust font size:

Workers at the production line of Anhui Jianghuai Automobile Co Ltd in Hefei, capital of Anhui province. [Photo/China Daily]


China's GDP grew by 6.9 percent in 2015, the lowest since 1990, the National Bureau of Statistics announced on Jan 19. But some economists doubt whether the Chinese economy grew at that rate given the poor performance of the stock market, the yuan's depreciation, and a series of poor economic data.

The turbulence in the Chinese stock market since the start of this year once again proves that rather than being a reliable economic barometer it is basically independent of economic fundamentals. The stock market's performance over the past few years, especially the last 19 months, shows it has been increasingly deviating from the real economy - basically chasing the trajectory of a fictitious economy. Since the stock market has been frequently driven by conceptual and short-term speculation, it should not be used a yardstick to determine the health of the Chinese economy as a whole. Instead, fundamental economic indicators should be used to diagnose the state of China's economy.

The serious industrial overcapacity and excessively high real estate inventory, combined with the government's central task of reducing capacity and stock in 2016, have raised fears of a drastic drop in the GDP growth rate.

But analyses of all the 41 industrial sectors will show only eight of them are suffering from heavy overcapacity and negative growth. The newly emerging and high-tech industries, including information technology, telecommunications and electronics, aerospace, railroad rolling stocks and pharmaceuticals are all performing well. And the traditional industries, including food processing, textiles and apparel, furniture, leather goods, rubber and plastic products, and automobiles and auto parts, are growing steadily. The latter two categories are apparently not suffering from heavy overcapacity.

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