China’s Xi Tells Markets to Get Use to Slower Growth

by on May 12, 2014 4:54 am BST

Chinese President Xi Jinping told the nation, and indirectly the global markets, that slower growth will likely become the “new normal,” as China undergoes the slowest growth expansion in almost 25 years.

Xi believes the fundamentals have no changed and the country can still take advantage of a “significant period of strategic opportunity.” Nonetheless, China’s fundamentals have weakened. Gross domestic products estimates are below the 7.5 percent the forecasts of the Chinese government.

Analysts infatuated with central bank intervention foresee this as an opportunity for more stimulus from the People’s Bank of China (PBOC). “Lower inflation readings are opening up room for monetary easing,” according to Kevin Lai and Tang Junjie, both economists at Daiwa Capital Markets. China saw consumer prices decline from 2.4 percent to 1.8 percent in last week’s data, .3 percent lower than analyst estimates.

It is uncertain how the PBOC will handle the weakening fundamentals, while trying to legitimize the nation’s economy and reign in the risks of speculative growth that led China’s growth in decades past. Ha Jiming, Vice chairman and chief investment strategist at Goldman Sachs’ investment management division in China, said that China’s debt-to-GDP climbed 69 percent to 229 percent since 2008.