China's Weakening Growth Signals Need for Fiscal Action

Recent economic reports from China are, at the least, mixed. The responses to Friday’s GDP report are illustrative. From IHS-Global Insight (Xianfeng Ren): China has reported the worst quarterly GDP growth, 7.6%, in almost three years. This is a less vicious downslide compared with the Global Financial Crisis if measured by peak-to-trough deceleration, but nearly as bad as in the Asian Financial Crisis.

By Labutes IR:China's economic growth has been amazing over the last few years, higher than 8% annually for the last seven years. However, the most recent economic data out of China has surprised on the low side and has increased the odds of an economic hard landing.

SHANGHAI — Dismal data from China and India on Friday may signal a further weakening of the global recovery, undermining hopes the dynamic emerging economies of Asia can help prop up growth.

Dr. Stephen Leeb submits:The big news this past weekend was China's decision to let its currency, the yuan, trade with more “flexibility” - in other words, higher. As you know, we've been expecting such a move for some time, but with more dread than optimism. Nonetheless, this slight change is no reason to panic.

ByChandrasekhar Rajagopalan:Quick service restaurant operator Yum Brands (YUM) will report its third quarter earnings on October 9. The company's performance may outpace the industry trend. However the weakening Chinese economy will have its unfavorable impact since the region is contributing nearly half of the overall revenues.

Last week was an excellent test for the overall bull market.  While data out of China pointed to decelerating growth, US equities held up surprisingly well.  High oil continues to be a challenge, but except for a few key sectors like Airlines, the broad economy still seems to be humming along.

By Christopher Grosvenor:China's Flash Manufacturing PMI fell to a 4-month low of 48.1 and the Flash Manufacturing Output Index declined to a 2-month low of 47.9. Readings below 50 signal contraction.New Orders and New Business Exports remained below the 50 level. Output Charges and Input Prices also remained below the 50 level.

By Morningstar: By Abraham Bailin Through sustained rampant growth, China has forged itself a place as an economic powerhouse in the international community. Typifying this trend, the past 10 years saw annual real GDP growth in China consistently range between roughly 9% and 14%. However, few, if any, economies can sustain such growth forever. Today, we believe China stands at the precipice of a major economic inflection.