Will the Asian Markets Remain Subdued?

For spread bettors who have some exposure to Asian markets, the recently announced cut in China’s annual growth target is quite significant. While it is impossible to predict what exactly will happen in these markets, it is quite clear that keeping a close watch is definitely the thing to do for now.

A 7.5% Target for 2012 

The longstanding 8% growth goal has now been replaced by a 7.5% figure signaling that China is acknowledging that the global crisis influences its economic fate too. The world’s second largest economy, China has an impressive amount of annual exports to the developed countries including U.S. and the Eurozone nations.

Several European countries are still struggling to get their own affairs in order. In these circumstances, exports to these countries is bound to be subdued. The same goes for the U.S. economy too. The U.S. has its own debt problems to deal with. The sluggish job market is not exactly an encouraging sign here either.

The expectation of reduced exports is the main cause driving the downward revision of China’s growth figures. Premier Wen Jiobao hopes that by setting the GDP growth a little lower, all sectors can be encouraged to focus on bringing about sustainable economic development within the Chinese economy.

Ministers Warn Against Current Mode of Development

The downward revision came after senior ministers warned against the current mode of development that is taking place in this country. As environment minister Zhou Shengxian put it, depletion of resources and lack of attention to the environment are some serious bottlenecks that will severely impair economic and social development. The Chinese Premier appears to be in consensus that change has to be brought about if an improvement in the quality and efficiency of economic growth is to be achieved.

Impact on Markets

Following the announcement, markets fell across Asia, as was expected by traders and analysts. European equities also exhibited a fall at around the same time. This fall can also be attributed to the subdued Eurozone business activity. U.S. stocks also traded lower while the dollar dipped slightly in relation to the Yen.

Overall, the Chinese ‘pullback’ of sorts is being viewed as a ‘tempered’ growth outlook.  If, as always, the actual GDP growth exceeds this figure, the Chinese have once again proven their mettle. If not, then their cautionary approach is justified. Either way, it is best to keep a close watch on what this economy is up to in order to gain an idea of what to expect here in future.

 

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