With growth already heading for a 23 year low, a hard landing would batter commodity markets, hurting mineral exporters like Australia, Brazil and South Africa and miners such as BHP Billiton Ltd and Rio Tinto Group, that have begun to slow expansion.
Mr Andrew Polk, an economist in Beijing with the Conference Board, a New York-based research group, who sees average growth of 5.5% over the next five years said that "This is a very delicate thing they're trying to do because to slow gradually is very difficult, partly because it's a self enforcing mechanism and it can become a vicious cycle. There's a distinct possibility that the slowdown could get out of control and the risk of a policy misstep cannot be discounted.'
Barclays analysts Sudakshina Unnikrishnan and Jian Chang outlined a growth risk scenario in their July 5 report brought on by slowing industrial production and growing risks of financial stress due to build-up of debt by companies and local governments. They also point to the implementation of Likonomics a term describing the market-reform policies of China's premier as possibly inflicting short-term pain on the economy even as it sets growth on a healthier long-term trajectory.
China's growth slowed for a second straight quarter to 7.5% in April to June, extending the longest streak of expansion below 8% in at least two decades. Manufacturing weakened further in July, according to a preliminary survey of purchasing managers, signaling that the nation's slowdown hasn't ended.
The Chinese government in March set a 2013 growth target of 7.5% and has a goal for an average 7% expansion during its current five year plan that runs through 2015. China hasn't grown less than 7.6% since 1990.
Mr Orville Schell director of the Center on US China Relations at the Asia Society in New York said that "I don't know if the world is ready for China's growth below 7 percent but it's not realistic to think of a country growing at 10 percent, even 8 percent for decades in a row. The Chinese economy too is mortal and ultimately will be subject to the same kinds of cyclical growth as every other economy.'
Li said recently that policy makers' bottom line for growth is 7%. The government announced support measures July 24 in the form of accelerated rail construction in the country's central and western regions, and tax breaks for small companies.
Source - Business Mirror