China’s economy slows in first quarter 2014

China’s economic situation for first quarter 2014 was one very different in years past, growing “only” 7.4%. Certainly an enviable rate by many other countries standards but for one that has experienced double-digit growth for several years this slow-down presents challenges.

It is typically quite hard to formulate a meaningful analysis of the Chinese first quarter due to the Lunar New Year. However, a comparison to first quarter 2013 which noted economic growth at 7.7% suggests the economy has indeed slowed since that period. Exports in January 2014 were strong, increasing by over 10%, but February and March data showed declines. This is the first time since 2009 that exports have fallen two months in a row. While declines in February were mainly attributed to weaker demand due to the Lunar New Year holiday period, the causes of the March slump have proved more difficult to discern.

Manufacturing activity meanwhile is either contracting or slightly expanding depending on which measures one uses – HSBC or Chinese government. Regardless, manufacturing remains sluggish as much of the low-cost manufacturing has shifted to other countries such as Cambodia and Vietnam.

As the economy slows, the government continues to implement stimulus measures to keep the economy from faltering further. For example, the latest ones were enacted in early April – the Chinese government announced plans to increase spending on its railroad infrastructure and extend tax breaks for small and medium-sized companies.

The slowing of China’s economy however is concerning not only domestically but also on a global level. But, according to a spokesman for the National Bureau of Statistics, “the growth slowdown is a reflection of China’s growth model transformation.” Perhaps, particularly as such domestic measures as retail sales indicate good year-over-year increase comparisons. For example, retail sales for March increased 12.2% and for January and February combined, retail sales grew at almost 12.0%.

How should China’s first quarter 2014 economic data be interpreted by the logistics industry? Maybe with a hint of caution particularly as manufacturing and trade activity continues to pick up throughout Europe and the US and as conditions improve in other emerging markets such as those in the Middle East and Africa.