Some fear economic slowdown of Chinese economy

CNN, May 14, 2012


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Written by

Lindsey Tugman

BEIJING, China (CNN) — In move to boost liquidity and lending, China cut the amount of cash banks must set aside as reserve. This move by the Chinese Central Bank comes as a growing number of international companies are eyeing China’s one billion-plus consumers.


But after years of double-digit growth, there’s increasing concern the world’s second biggest economy is slowing down. And this comes as China is poised for a once-in-a-decade leadership change.


Mrs. Fields is hoping for sweet success in china. The American cookie chain has opened its first two shops in Beijing with its eyes set on the increasingly wealthy Chinese consumer. Mrs. Fields franchisee James Tong says, “As the standard of living improves,” he says, “the demand for sweets has also grown. People want more variety in their desserts now, whereas before they were just worried about having enough food to eat.”


The Utah-based company hopes to make China one of its biggest markets outside the U.S. But these days some businesses are wondering if china is a surefire bet.
Recent data showed the economy here is in worse shape than previously thought.


In April, everything from retail spending and investment to industrial output and imports slipped, prompting authorities over the weekend to make it easier for banks to lend in a move to offset the weakening growth. Bill Russo, CEO of Synergistics says, “They understand the rate of growth going forward is not going to be what has been in the past and they’re trying to get in out front of the slowdown in order to keep in-line with a more sustainable growth pattern going forward.”


After years of overseeing double digit growth here, the government has been on a campaign to cool the world’s second largest economy taking measures to ward off potential bubbles amid concerns of a hard landing.


Yet now some investors fear China’s leaders could become distracted from taking the right action to steer the economy. The authorities are embroiled in the country’s worst political infighting in decades ahead of a leadership transition.


Russo says, “Those actions, as well-intended as they may be, may not be perfect, and in which case they will see and make an adjustment. Again, so I think the government’s heavy intervention in the economy could have consequences that are not anticipated.”


This fueling uncertainty to an already sputtering world economy amid hopes that more Chinese will soon be “rolling in dough.”