We have all heard that China's GDP "growth" was 12% last year and will "slow" to 7% this year. However, we have also heard that as many as 20% of China's factories are in trouble, and that production in many of its steel mills have slowed to a crawl. Australia's mining companies have seen their mineral prices plummet, along with their share prices, largely due to a big drop in demand from China. This fact is borne by stories of migrant workers in China returning back to their rural homes because of factory closures.
Something doesn't add up. GDP by definition is the total value of all goods and services produced in a country. If China's growth is slowing down, that means it is still growing albeit at a slower pace. Nothing in the newspapers have said anything about contraction. So, what is holding the GDP figures up, I wonder? I can only imagine that the talks about China's GDP growth slowing down to 7% is not true. The facts are clear for all to see: China's GDP is simply NOT GROWING. This implies that the world cannot count on China to prevent us all from sliding into a recession. Bearing this in mind, is it any wonder that share prices continue to see-saw downwards?