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With the U.S. suffering an economic slowdown, the last thing the world needs is its second-largest economy to show signs of weakness! Unfortunately, recent Chinese economic data seems to be hinting that the Asian giant is in for a rough ride.

Take a look at these three weak spots in China:

1. Inflation

China’s CPI report for March showed an annual inflation reading of 2.1%, lower than the estimated 2.5% figure. This also marked a 0.9% decline from the 3.2% reading posted for the previous month, chalking up its steepest dive in 10 months.

The sharp slowdown in inflation was spurred by a considerable slump in food price inflation, which slowed to 2.7% in March from February’s 6% increase.

The March producer price index, which is generally considered a leading indicator for inflation, posted its 13th consecutive monthly decline with a larger than expected drop of 1.9%.

While the annual CPI is safely below the government’s 3.5% limit, the sudden drop in inflation suggests that the People’s Bank of China won’t be tightening monetary policy or increasing interest rates anytime soon.

2. Trade Balance

During the week, China also surprised the markets with a significantly weaker than expected trade balance. The actual report showed a 0.9 billion USD deficit, way worse than the estimated 15.2 billion USD surplus.

Components of the report revealed that a jaw-dropping 14.1% increase in imports outpaced the 10% growth in exports, resulting to an unexpected deficit.

Although several number crunchers remarked that some of the figures are subject to statistical error, the trade data still reflects the drop in sales to U.S. and Europe as weaker global demand is starting to weigh on the world’s second-largest economy.

3. Debt Levels

Credit rating agency Fitch recently warned China regarding its excessive debt levels, eventually cutting the country’s long-term local currency rating from AA- to A+. According to their statement, the rise of easy credit and the emergence of a shadow banking system are the main reasons for the downgrade.

At present, Chinese lenders have issued private sector credit amounting to nearly 140% of the country’s GDP, the third-highest level among emerging economies.

What Fitch found particularly troubling was non-bank lenders, which are collectively referred to as the shadow banking sector, account for nearly half the total credit issued.

In other words, small financial institutions with limited resources to weather loan defaults are lending to less worthy borrowers with weak financial standing.

All in all, these indicators suggest that there are still some structural weaknesses in the Chinese economy. Sure, these appear like small cracks on a wall for now but if worsened, the economy could collapse.

Do you think China will keep showing signs of weakness?