China has achieved its self-appointed target of growing at an annualised rate of almost 7 per cent in the last quarter, but the numbers do not tell the whole story. The country’s economic woes are far from over.
China’s official index of manufacturing activity has plunged again, hitting its lowest level since 2012. Some investors expect Beijing to respond with a further stimulus, and the prospect has sent a wave of optimism through Asian stock markets. That may be the wrong prescription for the economy.
There is no doubt that Chinese manufacturing is facing fierce headwinds. Producers already struggling with excess capacity are now contending with weakening demand. Falling commodity prices are intensifying deflationary pressures.
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