China eyes L-shaped growth on stable inflation, trade balance contracts

China, the world’s second largest economy is expected to witness an L-shaped growth curve in the near term, barring prospects of a V or U-shaped growth, on recent data released by the Chinese government which lent a flattish note to its expansion prospects.

Projections of growth in Chinese economy came amid faltering trade balance data released over the weekend. China’s April trade contracted, with dollar-denominated exports slewing 1.8% on year, compared to 11.5% surge in the same period a month ago. Imports declined 10.9%, deepening from -7.6% in the month ago period.

While, a set of economic indicators paved a positive way for China’s long-term growth in March, April figures disappointed, with CPI-led inflation coming in at flat at -0.2% and PPI at -3.4%, slightly higher than expectations.

However, the L-shaped growth is expected to sustain over a considerable period of time and investors are alarmed to avoid reacting to unproductive short-term volatilities, since economic transitions can spare over a decade’s time to come in to effect.

Meanwhile, it would not be correct to consider that China would rely on either on equity or property markets to tackle the economic slowdown. However, the government would continue to adopt and impose demand-side policies in a controllable way, specially at a time when the economy grew 6.7% through the first half of this year, having an official annual growth target of at least 6.5%.