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.