How to Trade Worse-Than-Expected China GDP

The growth of China’s gross domestic product has been one of the engines driving everything from the cost of industrial metals to luxury goods stocks in recent years.

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Worse-than-expected figures for Chinese GDP growth in the first quarter – which came in at 8.1 percent rather than the forecast 8.4 percent - have, not surprisingly, caused some consternation in markets. China has been a powerhouse of growth, while the specter of recession looms over many Western economies.

European sharesopened lower Friday following the news, while the price of oil fell.

The Australian dollar and most other Asia-Pacific currencies, with the exception of the yen , fell against the U.S. dollar amid worries that a Chinese slowdown would affect the rest of the region.

Yet some argue that slowing growth in China will be positive if it means a more sustainable growth pattern, and that there could be an opportunity to buy on weakness in currencies and commodities.

“We want Chinese growth to slow. In the bigger scheme of things, it may be short-term painful with weaker export demand, but it’s rebalancing the global economy,” Simon Smith, chief economist at FXPro, told Squawk Box.

China also showed a rebound in activity in March, after Chinese New Year, which analysts at Barclays Capital believe could be positive for the rest of the year. They kept their full-year forecast of 8.1 percent growth, and wrote in a research note that this could go even higher.

They pointed out that production of steel, cement and automobiles, as well as sales of household electronic appliances, all rebounded in March – indicating that the economy is looking up. This should support the oil price.

The commodities market is expected to be temporarily affected by the GDP figures, but to rebound shortly.

“We expect most of these industrial commodities to come under pressure,” Walter De Wet, head of commodities research at Standard Bank, told Squawk Box Europe.

He pointed out that iron ore, steel and copper are particularly reliant on the construction sector.

“Ultimately, China will be the marginal consumer for these commodities,” he said.

The Chinese property market, one of the key causes for concern over a hard landing, could be about to improve, according to Gigi Chan, fund manager at Threadneedle.

“It’s still an immature property market with home ownership only taking off last decade,” she said.

“Now that policy is dampening prices, if wage growth can catch up, I’m not worried.”

The GDP figures showed a marked rise in loans, following Chinese government action to boost mortgage lending and construction – which have created fears of a property bubble in China.

“Longer-term, you have to be more balanced looking at this market. There’s a lot of wealth creation in China and with capital controls, it’s very difficult to find investment demand, so money does tend to find its way into the property market,” Chan said.