What’s the weak global economy to do when one of its strongest players — China — is growing at its slowest pace in three years?
Worry. A lot.
The world's second largest economy expanded at an annual rate of 7.6% in the second quarter compared with the same period in 2011, according to the National Bureau of Statistics.
That’s hardly paltry, considering that the U.S. economy grew less at a 2% annual rate during the same period. But during the previous quarter, China’s gross domestic product increased at an annual rate of 8.1%. A year ago, it was growing at a 9.5% rate.
The country has enjoyed roughly double-digit growth every year since the 1990s.
The implications for other major economies aren't pretty. Chinese demand has driven exports from debt-ridden Europe and the U.S., which has seen the Asian superpower become its second largest trading partner behind Canada.
Wall Street, however, celebrated the figures, which by falling below the psychologically significant 8% benchmark will probably force Beijing to take more dramatic steps. The Dow was up 170 points, or 1.36%, to 12,744 in midday trading in New York.
The Chinese government has been trying to hit the brakes on the nation’s blistering growth this year, attempting to make it more manageable and consistent as the country’s top leadership prepares for a reshuffle.
Even the statistics bureau on Friday acknowledged the “complicated and volatile economic environment at home and abroad,” saying that the government had “paid more attention to maintaining steady growth … and made great efforts in policy presetting and fine tuning.”
Now housing prices are tumbling and home sales are surging. The manufacturing sector is getting weaker, but both imports and exports are on the upswing.
The long-held truism of cheap Chinese labor may be losing ground: Urban household income is up 13.3% -- in part reflecting higher wages that may be pushing some international companies to relocate outside China.
There has been some stimulus, too. The People’s Bank of China has cut interest rates twice since June to boost investment and has lowered banks’ reserve requirements thrice since the fall.