CHINA OUTLOOKS

DIVIDED VIEWS ON CHINA OUTLOOK

Fintan Ng

The Star, Septenber 1, 2012

Debates on the possibility of hard landing rage on but is it a cause for concern?

IS China facing a hard landing? The debate rages on but the pessimists seem to have the upper hand now despite the arguments of the likes of emerging markets guru and executive chairman of the Templeton Emerging Markets Group Mark Mobius, who argues that China continues to grow, albeit at a slower pace.

Recent economic indicators and corporate earnings suggest that despite the push for domestic demand to bolster the economy, external challenges have taken a toll on economic growth and outlook.

China posted a second-quarter gross domestic product (GDP) growth of 7.6% year-on-year, a three-year low. The official growth estimate for the year is for GDP to grow 7.5%, marginally lower than the 8% estimated earlier in the year.

The pace of growth, while better than the United States or eurozone, is where the crux of the hard landing/soft landing argument lies. What is hard or soft landing in the spectrum of growth?

Pessimists believe that China's economy will continue to slow but have not made a case or a definition for a hard landing. Is the definition of a hard landing anything below the official estimate for this year or is it anything below the double-digit growth of recent years or perhaps below-par growth which will not be able to support long-term trend growth?

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