China Sets Growth Rate of 6.5%

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The Bund Shanghai

It’s no secret that the Chinese economy is slowing.

Stocks around the world, and particularly across Asia, have slashed themselves this year, with the SHCOMP in Shanghai losing 14.5% of its value for the year.

Now China has set a range on their growth, predicting it would grow 6.5%-7% in 2016, slightly lower than last year’s 7%. This is the first time since 1995 that Chinese economists have set a range for growth, rather than a specific target or number.

The announcement comes a month earlier than usual, in what is being seen as an attempt to reassure investors. China will also loosen restrictions on the outflow of foreign capital.

Overall, China isn’t in fantastic shape. Facing its second bear market in less than one year, with foreign investment shrinking $513 billion, the Yuan dropping to five-year lows and facing the slowest growth in 25 years, this latest announcement is unlikely to create optimism in China watchers.

6.5% for any other nation in the world would almost certainly lead a stock market rally, but for China, used to reporting double-digit growth or close to it in recent years, it’s a relatively weak number and a sign that the golden era of breakneck economic growth is over – at least for now.

What do you think? Is China facing a fundamental change in structure which will see the old days of 10%+ growth relegated to memory? Or is this a temporary setback which China will recover from stronger than ever.

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