A shock setback for China’s “Red Dragon” economy stoked fears over global growth prospects today as oil prices sank and mining shares crashed in London.
China — the world’s second-biggest economy — grew at an annual pace of 7.7% between January and March. While hugely impressive by the standards of Western rivals, this was well below the 8% expected and represented a slowdown from the 7.9% pace seen in the final three months of 2012 in an early setback for new Chinese premier Xi Jinping, pictured.
The data raised concerns over China’s voracious demand for commodities, sending Brent crude falling almost $2 a barrel and hitting a host of the FTSE’s biggest mining stocks. Evraz was the biggest casualty as its shares fell almost 9%.
IG market analyst Alastair McCaig said commodites stocks “led the charge lower” as London’s blue-chip index lost nearly 1%. “The FTSE 100 has spent the entire time in the red,” he added.
ING Bank economist Tim Condon slashed forecasts for Chinese growth today and warned predictions of an 8.1% advance for the year overall were headed down: “Our forecast was based partly on our view that stronger global growth as the year progressed would support stronger China growth. Today’s data undermines our confidence that the strengthening in global growth will be enough.”
Analysts blamed slowing industrial production for the setback as China’s annual growth of 8.9% fell short of the 10% expected.
The latest poor news comes after ratings agency Fitch cut its credit score last week amid worries over a credit build-up in the Chinese economy. The World Bank also cut its 2013 forecast for China this year by 0.1 percentage point, although it still predicts robust 8.3% growth.
