profit growth

A few months ago, we already alerted you in a previous column about some interesting remarks, made by Christine Lagarde, the head of the International Monetary Fund. Lagarde said that ‘if there’s any growth amongst the emerging countries/economies, it will come from India’. Since this statement, the Central bank of China has cut the interest rates even further.

China interest rate

Source: tradingeconomics.com

That was a remarkable statement and initially we thought this was just a strategy to draw the attention away from the Chinese stock market which was extremely volatile during the summer months, but now the Chinese President, Xi Jinping, told the attendees of the G20 meeting in Turkey that ‘the world needs to find new sources of economic growth’, and that’s a very remarkable statement from a government leader that has continuously said there’s no problem at all in China nor with the Chinese economy.

Xi Jen

Source: Huffingtonpost.com

The statement isn’t a real surprise as the Chinese economy grew by just 6.9% YoY, which seems to be the lowest growth rate in a few decades. And that could be worrisome. Of course, at a pace of 6.9 (or 7)% per year, the Chinese economy is still fairly robust and it will continue to grow. However, Jinping’s recent statement might indicate China is unsure whether or not it will effectively achieve the 7% growth rate in the current financial year and the country might already be preparing the world for a sub-7% economic growth from next year on.

Shanghai 1

Source: stockcharts.com

The financial markets in China didn’t seem to care too much about the statement, but we’re afraid the 200 day moving average (the red line on the chart) might be a very difficult hurdle to take in the coming weeks.

China Growth Rate

Source: tradingeconomics.com

Every modern first world country would be ecstatic with even just half of that growth rate, but a slowing Chinese economy would send shivers down a lot of spines. Why? Because there is no alternative, and the entire world seemed to have been relying on the double-digit growth numbers.

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