The red dragon slows down

Once the subject of scrutiny for being an overheating economy; China is now under the radar for a possible slowing down of its growth rate.
The first quarter of 2012 has been quite hard-hitting on the Red Dragon. Fuelled by recessive forces in the eurozone, export growth has been much slower than expected, with only a 4.9 percent growth recorded in April compared with a year earlier. In April 2011, the export growth was 29.9 percent on a year-on-year basis.
Even bank lending has fallen down considerably - medium- and long-term loans are down nearly 50 percent from last year. At 8.1 percent, the GDP growth rate during the first quarter of 2012 was the slowest in three years.
Growth forecasts for the economy have been revised downwards as well. In its latest update about the economy, the World Bank brought down the GDP growth rate forecast to 8.2 percent for 2012 from its earlier forecast of 8.4 percent.
Needless to say, dwindling exports, led by the eurozones economic turmoil, have a significant role in bringing down these growth targets. Its the worlds second-largest economy we are talking about here, and the impact of its slowing growth has the potential to be quite catastrophic for global markets.
The country is likely to become the worlds biggest importer by 2014, and, consequently, its slowdown could also mean an easing of in commodity markets, such as oil and base metals. Nouriel Roubini, the doom economist has factored in Chinas growth slowdown as one of the reasons for a slower global economic growth in 2013.
It appears that pumping up Chinas economy is pretty much an imperative, but how?
The Chinese premier Wen Jiabao has suggested infrastructure-led growth, as well as a cut in taxes and more credit for small and medium-sized businesses.
The WB, however, suggests a greater role of fiscal policy, counselling against excessive bank lending and infrastructure investment to stimulate growth. As for interest rate cuts, the WB believes these should be kept for more dire circumstances if the pace of growth worsened more than expected.
Overall, there is greater acknowledgement amongst economists and analysts, however, that the growth stimulus should be more consumption-led and less driven by external demand.