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Two Chinese workers prepare to remove scaffolding at a construction site in Beijing on April 15, 2014. Chinese exports and imports fell sharply in March, data showed on April 10, as officials noted that the world's second-largest economy faces headwinds from tougher regional competition and 'friction' with trade partners. 

China’s first quarter Gross Domestic Product (GDP) growth in 2014 was 7.4 percent, the slowest China’s economy has grown in a year and a half.  Markets in Asia rose because of China’s GDP news.

“Markets are going to say: ‘oh, they hit their target, they exceeded their target, whew,’” said Patrick Chovanec, chief strategist at Silvercrest Assett Management. “Actually, I breathe a sigh of relief when their GDP number goes down," said Chovanec. "Because it makes me think: ‘maybe they’re serious.’ Maybe the declarations that quality matters more than quantity, that they can’t add to the bad debt.”

Chovanec echoes many China economists when he says sustained high GDP figures usually reflect unhealthy growth – In China’s case, that means building more infrastructure - which carries the burden of more debt.

Slower growth, however, could be an indication that China’s leadership is serious about making tough changes to its economic model. China's GDP number is currently somewhere in between – it was pulled down by housing sector problems, yet retail sales in China were up.

 

 

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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